"Companies will triple their investments in bitcoin." Why the market will continue to grow

At the end of August, companies accumulated 3% of the total amount of the main cryptocurrency. Experts have predicted that in a few years this share will grow to 10%
"Companies will triple their investments in bitcoin." Why the market will continue to grow

According to the latest data, companies own almost 3% of the total number of bitcoins (21 million). At the end of August this year, they have accumulated 537 thousand bitcoins ($25.2 billion at the current exchange rate at 14:00 Moscow time on August 26).

The first place in the list of the largest bitcoin owners among the companies is MicroStrategy, which has accumulated almost 109 thousand digital coins ($5 billion at the current exchange rate as of August 26). MicroStrategy last invested in bitcoin on Aug. 24.

Tesla and Square are in second and third place, respectively. The automaker announced its bitcoin purchase in February of this year. As of Aug. 26, Tesla owns 43,200 bitcoins ($2 billion).

Square invested in bitcoin in February 2021 and October 2020. Twitter founder Jack Dorsey’s payment company owns 8,000 digital coins ($374 million). In early May Square published a financial report for the first quarter of 2021, according to which the income from investments in bitcoin was $3.5 billion.

Will companies’ share of the crypto market grow?

Taking into account lost or unavailable bitcoins, companies currently own about 3.75% of the total bitcoin issue, according to Nikita Soshnikov, director of cryptocurrency exchange service Alfacash. According to him, this is a small volume, but it is enough to talk about the interest of the corporate sector in the cryptocurrency market.

“The interest is shown not only in direct ownership of bitcoin, but also in derivative instruments – futures, investments in cryptocurrency companies. And here the position of institutional investors is stronger than in the market of cryptocurrencies themselves”, the expert noted.

August 25 it became known that the banking giant Citigroup is waiting for approval of financial regulators to begin trading bitcoin futures on the Chicago Mercantile Exchange (CME). Major U.S. banks are actively entering the crypto market. In mid-July, it became known that some clients of Bank of America got access to bitcoin futures trading. And in June, Goldman Sachs partnered with Galaxy Digital to ramp up trading in cryptocurrency futures.

In late 2017, CME Group issued a bitcoin futures. Immediately thereafter, the price of the main digital coin and altcoins began to fall and moved into a long-term decline phase that lasted more than a year. At the end of 2020, CME Group launched Ethereum futures trading. The coin became the first altcoin to be traded on a stock exchange.

Institutional investors are investing in cryptocurrency companies as well. For example, investment company ARK Investment Management in April bought shares of cryptocurrency exchange Coinbase in the amount of $246 million after their listing on the NASDAQ stock market and added securities to three own exchange funds.

Now it is more correct to talk about the progressive entry of institutionalists to the crypto market, Soshnikov believes. In his opinion, this is just the beginning of their journey in the world of digital assets.

“Obviously, their presence on the crypto market will only grow over the years”, the expert added.

Expect a massive influx of institutional investors into the crypto market before 2023, Soshnikov said. He argues that it is in 2023 that there will be a powerful jump in bitcoin prices in anticipation of the 2024 halving.

Halving is a halving of the reward for a mined block that occurs every four years. Initially miners received 50 bitcoins, this was reduced to 25 coins in 2012 and 12.5 coins in 2016. On May 11, 2020, it dropped to 6.25 bitcoins. Halving occurs every 210,000 blocks mined. The next halving is scheduled for 2024.

Market development

With all the regulatory complexities and uncertainties about the cryptocurrency, investing even 3% of the issue by large companies seems serious, says Victor Pershikov, lead analyst at 8848 Invest. He reminded that 3-5 years ago the participation of institutional participants and classic business in the crypto market, dispersed by retail participants, could only dream, whereas now the purchase of digital assets on the balance sheet or the adoption of cryptocurrency as a means of payment by a company is no longer news.

This trend will continue in the context of inflation risks, businesses will be looking for protective investments for their assets, and now cryptocurrencies satisfy this quite well, the analyst believes. It is likely that in the next 1-2 years the volume of companies will triple their investments in bitcoin, Pershikov predicted.

Institutional purchases set trends rather than follow them, so businesses are unlikely to behave like retail participants and run after price growth, the analyst believes. According to his observations, over the past couple of years, big purchases of bitcoin have occurred before bullish moves, not after they have taken place.

“As part of the correction to the levels of $45-40 thousand, which is possible in the near future, we will hear new names of companies invested in bitcoin, after which the asset can rush to its historical highs”, predicted Pershikov.

The arrival of institutions in the crypto market contributes to its greater stability and predictability, Artem Deyev, head of AMarkets’ analytical department, explained. He agreed that in the future, large companies will begin to purchase bitcoin more actively in the hope of gaining additional profits.

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