Institutional demand for crypto isn’t subsiding, but impact will be gradual

For example, just last week, with the currency hovering around the $ 30,000 line, a slew of pundits warned investors to prepare for the impact, suggesting that the leading crypto asset was about to correct and is rising again the $ 20,000 region could fall.

In just one day, however, Bitcoin was playing with the bulls again, testing the $ 38,500 limit again to witness a sell-off and eventually settle in the $ 33,500 region. While for most crypto veterans who may have spent another day in the office, others referred to the upswing as “Elon’s Candle”, this refers to Elon Musk, Tesla CEO, who added “Bitcoin” to his Twitter bio and also sent the following cryptic message “in retrospect it was inevitable” to its around 40 million followers online.

Has the recent price volatility, regardless of the cause, deterred institutional investors or are they still looking to buy Bitcoin? But if so, it’s strange to see BTC continue to hover between $ 30,000 and $ 40,000 while reports from well-known players raise sizable sums of money from Bitcoin. For example, on January 22nd, when BTC was down 15%, MicroStrategy announced another BTC sales contract worth around $ 10 million.

On the subject, George Donnelly, CEO of Panmoni – a trading system for Bitcoin Cash – told Cointelegraph that there is absolutely no doubt that institutions will still want to buy Bitcoin, saying:

“Grayscale is expanding to create some new DeFi trusts, and people are buying shares in MicroStrategy to get involved in BTC. BTC may get stuck around 30,000 as retail interest wanes. This bull market hasn’t been as loud as the last one so far. Fewer people seem to be happy about it. “

Additionally, he believed that a major reason BTC can’t break out is because the currency’s developers “deliberately limited network throughput for ideological reasons” and even tried to use it in their Layer Two networks divert, thereby reducing the ecosystem security. Even then, he believes the currency will “cross the $ 40,000 mark” in the next three months.

Bitcoin has not stalled, it just adapts

With another $ 2 trillion stimulus package seemingly on the way thanks to the new President of the United States Joe Biden and the Federal Reserve, a lot of crypto hype is once again being generated, especially as more and more people begin to understand the future Effects of such uncontrolled money printing and how it can devalue the US dollar to unprecedented levels.

Filipe Castro, co-founder of Utrust – a crypto-enabled e-commerce platform – told Cointelegraph that the continued expansion, or rather dilution, of the US dollar monetary pool will sooner or later put the effects of hidden inflation into perspective on the American economy, adding:

“While inflation has not been felt very badly among consumers of goods and services, it has manifested itself with the surge in US dollar-denominated assets such as stock market valuations, real estate, commodities and cryptocurrency. Many institutions have decided not to keep cash as a safe haven, but to invest their capital accordingly. “

He also emphasized that institutions usually do not trade directly in the market, but instead buy from a custodian bank intermediary, the latter usually ensuring the necessary liquidity in advance and thus minimizing the direct market influence on the entry of large buyers.

For laypeople, this means that an increase in demand is reflected asynchronously over time. In addition, there is large periodic variance instead of a quick result of recent announcements. “It is therefore likely that it will take some time for future voltage spikes to manifest, and in large and sharp fluctuations,” he added.

Institutional interest isn’t going anywhere anytime soon

While one might be tempted to believe that mainstream interest in crypto is finally waning, one should keep in mind that institutional buying cycles work very differently than the activities of individual traders and smaller institutions.

For example, Castro has highlighted that few institutions have actually taken an active position on Bitcoin, including some family offices. Additionally, it should be noted that new asset approval processes and risk assessments can typically take months or years to become a whole new investment paradigm for many traditional investors.

On this issue, Lennix Lai, director of financial markets for the exchange of cryptocurrencies OKEx, told Cointelegraph that many institutions are turning to other assets such as BTC because of its undeniable potential as the world’s global reserve currency, the US dollar, becomes increasingly weaker Regarding capital appreciation, it states:

“BTC remains a high risk asset and I believe some institutional investors still have conservative customers with a wait and see attitude. If BTC can maintain its decoupling from the stock market and stocks eventually wear off when the FED buys assets, another wave of funds could flow into BTC. “

That being said, COVID-19 virus mutations, a slow adoption of vaccines, global lockdowns, and rising unemployment all add to the ongoing economic uncertainty – something that has the potential to spill over into various financial markets, including crypto, as noted the course of the last one 12 months.

Connected: Risk it for the Bitcoin: has BTC matured into a safe investment game?

On the subject, Nischal Shetty, CEO of Cryptocurrency Exchange WazirX reiterated that the reason more and more funds are researching Bitcoin is because it is becoming a legitimate inflation hedge, the impact of which he finally felt was likely to be the impact the global money pool is further diluted. He added, “As inflation rises, we believe that more institutional investors will buy bitcoin.”

Castro stated that institutional interest was just beginning and that the recent announcements should simply be viewed as a “wake-up call” for other players who have not yet understood the proposal made before them. “This is still a long way from being a widespread institution [interest] that should come. We will certainly see a higher cap as more and larger institutions diversify into BTC and other cryptocurrencies, ”he added.

Is Another Outbreak Inevitable?

While there are a multitude of ways on paper to analyze and predict the price of BTC, the fact is that it is next to impossible to guess with certainty the price movement of an asset. However, there are a few indicators that we can look at to determine the potential valuation.

For example, Lai pointed out that based on historical data related to BTC’s power halving, it could be on the verge of breaking out to $ 50,000 soon and even climbing to $ 100,000 by April 2021.

On this issue, Castro believes that there is not yet an accurate model to describe the basic behavior of BTC and adds that the only framework he actually takes into account when evaluating BTC is stock-to-flow PlanB’s model is that if you want to believe it will see the biggest surge in cryptocurrency was between $ 100,000 and $ 288,000 before the end of 2021.

Connected: Believe, Don’t See: Institutions are still forecasting Bitcoin price of $ 100,000

Another reason Shetty’s opinion makes such predictions so difficult is that with every rise in the price of Bitcoin, there is increasing selling pressure from long-term investors: “These are the investors who are long and want to be to dilute certain historical prices. $ 40,000 appeared to have been the historic price point at which many old Bitcoin holders decided to liquidate. “

Bitcoin (BTC) is proving to be one of the biggest mysteries of the decade, and anyone who claims to know where the currency could go is most likely wrong on this point.