Institutional Bitcoin Investors Hodl As S&P DJI Opens New Crypto Bridge
Institutional investors are about to get another instrument to access cryptoassets as they have already poured billions of US dollars in bitcoin (BTC) only. And these investors are not looking to sell BTC anytime soon, according to analysts.
Today, US-based major index provider S&P Dow Jones Indices (S&P DJI) unveiled plans to launch cryptoasset indexes, which will only play into the hand of big investors. The company partnered with Lukka, a New York City-based crypto asset software and data company.
According to S&P DJI, these new index capabilities will make it easier for investors to access this “emerging technology-driven asset class while potentially mitigating some of the common risks associated with this traditionally speculative market.”
As reported, if the BTC rally of 2017 was thanks to retail investors, then the nod for the 2020 bull-run should probably go to institutions. Institutions have stepped up to the plate in 2020, as evidenced by corporations like MicroStrategy and Square as well as sophisticated traders such as Paul Tudor Jones and Stanley Druckenmiller all catching bitcoin fever.
Meanwhile, the Chicago Mercantile Exchange is also experiencing robust volume in its BTC futures contracts, with open interest having recently surpassed the USD 1bn threshold.
“CME Bitcoin futures open interest made a new all-time high above $1bln in dollar notional. Assets under management… https://t.co/dPdDarcO0M— George Adams (@understander_of)
The broader cryptocurrency market has also benefited, as a rising tide once again seems to lift all boats. But according to some market leaders, institutions are not leading the altcoin rally — including the one that is unfolding in litecoin (LTC), ranked 5th by market capitalization.
@AlexSaundersAU @RaoulGMI @SatoshiLite I’m not saying that the ghost chains can’t rally. I will say that I don’t kn… https://t.co/S0CBhu2WDG— Mike Novogratz (@novogratz)
Meanwhile, according to a popular trader known as Crypto_Ed_NL on Twitter, institutions seem to have no intention of selling BTC even at USD 22,000 or USD 30,000, saying “they have much higher targets” in the ballpark of USD 100,000 - USD 300,000. That is a similar prediction made by the Winklevoss twins, who have what they deem a conserative bitcoin price estimate of USD 500,000.
With the bulls back in control, and the BTC price up roughly 43% in the month of November alone, market participants are already eyeing bitcoin’s next big milestone. Among them, Charlie Morris, founder and Chief Investment Officer of ByteTree Asset Management, who suggested that bitcoin has more runway for gains, saying “it is curious that bitcoin hasn’t already spiked higher.” He pointed to the ease in which it almost recaptured USD 20,000 as well as a strong narrative and robust network.
Additionally, bitcoin products such as those managed by Grayscale Investments, among others, are for hodlers, Morris pointed out, as once these firms buy bitcoins, they hold on for dear life.
"Even during the 2018 bear market, these funds held firm, even managing some modest accumulation. They now collectively hold BTC 599,533," he said, adding that "since mid-October, they have accumulated 100k BTC, which is enormous."
As reported this week, the USD 5.3bn Guggenheim Macro Opportunities Fund said it might allocate up to 10% of its net assets.
And as Danny Scott, CEO of UK bitcoin exchange CoinCorner pointed out, the amount of BTC held on exchanges is falling at unprecedented levels, which translates to less selling and more long-term positions.
Bitcoin as a reserve asset
As bitcoin’s popularity grows among institutions, the US dollar is having a tough time. In a report entitled “The Fraying of the US Global Currency Reserve System,” popular generalist investor and Swan Bitcoin, a BTC investing app, advisor Lyn Alden detailed her bearish take on the US dollar, saying,
“Going forward over the next 3-5 years, I still expect many currencies including the dollar to continue to devalue vs hard assets, and for the dollar to probably be among the weaker major currencies during that time frame.”
Alden took the opportunity to address bitcoin as a reserve asset, referring to a “fervent group of proponents for the idea that Bitcoin’s network effect is too strong to stop and that it will continue to expand exponentially until it eats the global financial system, i.e. hyperbitcoinization.” She acknowledged the crypto community for its voracity, adding that “increasingly over time, Wall Street money has poured in as well.” Alden conceded,
“Even if it never reaches the scale that some Bitcoin proponents believe it might, it could still be used as part of a global monetary system.”
At the time of writing (17:01 UTC), BTC trades at USD 19,372 and is up by 2.6% in a day and 16% in a week. The price rallied 158% in a year.
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