After the euphoria of December 2017, Bitcoin is looking for a new lease of life. Messari researcher Ryan Watkins says it could be caused by an influx of institutional investors.
Diversification soon needed?
Several months ago, we would have considered this study as fanciful, but the arrival of Paul Tudor Jones changed the game. Bitcoin's status and its decorrelation with other assets could cause an influx of cash.
According to Messari, the diversification sought by institutional investors is the key to the equation. Bitcoin could reach $ 50,000 and become the center of attention again.
What capital flows would be incorporated into Bitcoin if (from top to bottom) foundations, family offices, sovereign wealth funds, pension funds and mutual funds allocated 1% of their portfolio to it?
Messari analysts analyzed the funds currently managed by various institutional players. The transfer of 1% of this sum would bring the valuation (market cap) of Bitcoin to one trillion dollars. Since entities outside the United States are not taken into account, the multiplier effect could prove to be much more significant.
In order to complete this analysis, I recommend for Anglophones the latest Grayscale study. It clarifies the methods of diversification of institutional investors.
Who will take the first step?
Opinions differ on the nature of the first capital injected into the market.
Watkins claims that Hedge funds will be behind this change. Ryan Radloff, CEO of Kingdom Trust ($ 8.5 billion under management) indicates that pension funds will have to take the lead, under increasing pressure from their members.
Despite these predictions, Watkins clarified that “Bitcoin does not necessarily need institutions to succeed” and that “if Bitcoin were ultimately to be considered as a store of global value and not sovereign, it would still be necessary to demonstrate conviction so that the institutional investors transfer their wealth there.
Tools are starting to multiply to facilitate access to cryptocurrencies. The Grayscale and Bakkt departments provide a highly regulated environment and increased security for these high-flying profiles.
However, most of the participation mechanisms offered to them come in the form of derivatives. They rarely involve possession of the underlying. Even if these instruments have the gift of familiarizing investors with this new asset class, it seems unlikely that an inflow of a trillium will be directly allocated to obtaining bitcoin.