- Institutional interest in cryptocurrencies decreased following the collapse of major crypto players like FTX after a prolonged crypto winter in 2022.
- The SEC approved the first Bitcoin futures ETF, ProShares Bitcoin Strategy ETF, in October 2021, and it was launched on the New York Stock Exchange on October 19, 2021.
- Paolo Ardoino, the CTO of Bitfinex, stated that Bitcoin holds significant value due to its unique nature and utility as a perfect store of value.
Institutional interest in the cryptocurrency market decreased with the collapse of major crypto giants like FTX, but recent ETF applications may have sparked renewed interest and restored confidence.
Institutional Interest Decreased in 2022
Institutional interest decreased in 2022 following a prolonged crypto winter and the collapse of major crypto giants like FTX. Bitcoin and many other cryptocurrencies remained relatively stagnant as several crypto exchanges came under regulatory scrutiny.
However, when news broke that BlackRock, Fidelity, Valkyrie, and other major financial institutions had applied to list spot Bitcoin ETFs, the price of BTC surged above $30,000. Although several institutional giants had previously filed spot Bitcoin ETF applications with the U.S. Securities and Exchange Commission (SEC), they either withdrew their applications or faced explicit rejections from the regulator.
The SEC approved the first Bitcoin futures ETF, ProShares Bitcoin Strategy ETF, in October 2021, and it was launched on the New York Stock Exchange on October 19, 2021. However, the spot Bitcoin ETF application from asset management giant BlackRock increased the likelihood of SEC approving the first spot Bitcoin ETF. Senior ETF analyst Eric Balchunas from Bloomberg assesses the chances of BlackRock’s spot Bitcoin ETF being approved as 50%.
The latest wave of ETF applications started with BlackRock’s application to the SEC on June 15. WisdomTree, Invesco, and Valkyrie followed suit in the following days and weeks. On June 28, ARK Invest, which had previously filed a spot Bitcoin ETF application in June 2021, modified its application to align it with BlackRock’s application. The next day, asset manager Fidelity Investments also filed an application for a spot Bitcoin ETF. So far, a total of seven institutional giants have applied for spot Bitcoin ETFs. Some industry observers believe that 2023-2024 will be crucial for the approval of spot Bitcoin ETFs.
Impact of Institutional Confidence on Bitcoin
Bitcoin made a remarkable recovery after 2022 and recouped more than half of the losses incurred during the bearish phase. This was largely driven by sustained interest from institutional investors.
Indeed, the presence of institutional investors in the crypto market has significantly increased compared to just a year ago. Until 2022, institutions had mostly stayed away from the market, with even MicroStrategy halting its BTC purchases. Many large funds and companies are now interested in cryptocurrencies and exploring investment opportunities.
Despite market volatility, global institutions maintain a stable interest in cryptocurrencies. Paolo Ardoino, CTO of Bitfinex, stated that Bitcoin holds significant value due to its unique nature and utility as a perfect store of value. Ardoino noted that “even the most traditional financial institutions have recognized this” and added; “It’s not surprising that Bitcoin’s value is better understood by the markets during a period of record inflation in both major industrialized economies and emerging markets.” He also mentioned that the increasing number of Bitcoin ETF applications from some of the world’s most important asset managers demonstrates the investor demand and issuer demand for Bitcoin, which will further intensify. It will attract new retail investors and encourage broader participation.
Last year, many institutions stayed away from crypto, largely due to the PR disaster initiated by FTX, compounded by bank failures. Richard Gardner, CEO of Modulus, said institutions predicted the crypto industry would boil over and chose to remain silent, considering the potential backlash and rewards after FTX.
Gardner stated, “We are at a point where most institutions are starting to weigh the risk and reward of coming back. Most institutions will be much more cautious due to the FTX disaster. They will mostly act based on the determinative regulatory environment. When governments create a complete regulatory regime and bureaucrats decide how to interpret the laws, institutions will measure their response and act accordingly.”
Institutional Entry into Bitcoin Boosts Bull Run Hopes
While the 2017 bull run started with retail demand, the 2020-2021 bull run began with institutional entries, with companies like MicroStrategy and Tesla adding Bitcoin to their balance sheets, along with many publicly traded companies.
As a result, although institutional interest declined in 2022, the approval process for spot Bitcoin ETFs in 2023-2024 and institutional interest in cryptocurrencies continue to impact the market. With increasing institutional entry and regulatory clarity, cryptocurrencies can be adopted on a broader scale and act as a catalyst for the next bull run. However, it is important to be aware of market volatility and risks. Conduct thorough research and take appropriate precautions before making investments.
