Due to the ongoing uptrend, many leading institutions in traditional finance have sought to join the crypto bandwagon so as not to miss the ongoing action. For starters, a jump in open interest and trading volume for Bitcoin futures has been seen at all levels over the past two months. While this might have been expected, what may come as a surprise is that the Chicago Mercantile Exchange, a global derivatives exchange, has recently become the largest Bitcoin futures trading platform in the world.
In this regard, data released by the crypto analysis platform Bybt indicates that CME represents $ 2.4 billion of the $ 13 billion overall open interest in Bitcoin futures, followed closely by the total of $ 2.17 billion from the crypto exchange OKEx and ahead of other top players such as Binance, Huobi and Bybit.
It’s no secret that the meteoric rise of Bitcoin (BTC) since December 2020 has increasingly gained the attention of investors around the world. To put it in perspective, despite the recent drop in BTC which brought it down to just under $ 32,000, the currency is once again trading well above the $ 38,000 threshold, showing a net profit on 30 days of about 95%.
Is institutional interest increasing or is stagnation setting in?
The recent volatility has raised concerns about the sustainability of the current bull season and raised questions as to whether institutional interest in Bitcoin is starting to plateau. Konstantin Anissimov, executive director of UK-based cryptocurrency exchange CEX.IO, told TBEN that it’s important for new entrants to realize that gambling is not just about institutions that freak out. a path in the market, but rather they see a decrease in the risks:
“Unless something really drastic happens that could turn this whole market upside down – and I can hardly imagine anything this bad – I think more and more large companies will continue to invest in Bitcoin and other cryptocurrencies in the future.
Quinten Francois, host of the YouTube channel Young and investor, believes that most institutions that wanted a piece of the action have probably caught on, adding that during parabolic phases like these, it’s hard to imagine more taller, richer players making their entrance in this space, at least until the end of the year when things become more stable.
That being said, he added that most of the institutions that got on the crypto sauce train are now likely to accumulate during dips, and when they stop, retail money will slowly return to the market. further increasing the value of BTC: “They are smart money and know what they’re doing, they won’t buy parabolic moves.
Jonathan Leong, CEO of the BTSE cryptocurrency exchange, told TBEN that “the institutional influx into cryptocurrency has just started.” He added: “The rapid appreciation in the price of Bitcoin and other cryptocurrencies during the fourth quarter has a direct correlation with this institutional influx or the expectation of such an influx.”
Will institutions reduce market volatility?
There is no denying that Bitcoin is a much more mature asset than during the bearish phase of 2018, especially with regulation having advanced significantly in some jurisdictions. In addition, the crypto market now has a significant number of professional trading houses and non-crypto companies participating in it.
These factors can go a long way to help mitigate bitcoin’s volatility and increase its liquidity as an investment asset, according to Anissimov: “Institutional investors are not so much the key to Bitcoin’s bull run, but a path through. which this market as a whole can be tempered, becoming more stable and efficient. “
That being said, if established institutions enter the crypto industry, they will have an effect on the price movement of most cryptocurrencies. Ultimately, this may help the industry as a whole, especially considering that most players in mainstream finance will be aiming for long-term deals that can potentially help protect Bitcoin from a crash. similar way to what was seen in 2018.
Recent movements are worth noting
Earlier this month, CoinShares, a European firm that deals with crypto-finance and exchange-traded products, announced that it had successfully facilitated the trade of over $ 202 million in XBT (Bitcoin ) on the first market day of 2021. It should be noted that the exchange-traded note provider Bitcoin is approved by the Swedish Financial Supervisory Authority and the aforementioned offers of the company are currently available for purchase via the Nasdaq.
In addition, according to CoinShares’ Digital Asset Fund Flows Weekly report of January 11, $ 34.5 billion of capital is held in crypto investment products as of January 8. Of this total, $ 27.5 billion, or 80%, is in Bitcoin. funds, while $ 4.7 billion, or about 13%, is invested in Ether (ETH) products.
Comparing the performance of Bitcoin funds during this ongoing bull run with that seen in 2017, the report states, “We saw a much larger investor turnout this time around with new net assets of 8, 2 billion US dollars compared to only 534 million US dollars in December 2017. “
Additionally, last year, the U.S. Office of the Comptroller of the Currency said in a landmark ruling that domestic banks can hold crypto assets. This announcement was followed by another major development in which the OCC also said that US banks can even provide services to stablecoin issuers, such as holding reserves.
While some traditional institutions were already engaging in this practice prior to the aforementioned ruling, there was an air of uncertainty around this space due to a lack of legal clarity. Now that an official clarification has been given, stablecoins that are backed one by one by fiat currencies held in a bank’s reserves are not considered a risk in the United States.