According to a Bloomberg report, institutional investors have replaced high net-worth individuals as leading investors in BTC and other cryptocurrencies. Through private transactions, institutional investment has been taking place outside of the crypto exchange market.
According to data from Coinmarketcap, the crypto exchange market handles around USD 30 Million per day. According to Digital Assets Research and TABB Group, the OTC market handles around USD 50-USD 250 Million in daily trades. With all the hype surrounding institutional investment, they have been steadily investing all along outside of the expected channels, such as the Coinbase Pro suite of institutional products.
Why the institutional investment?
The biggest criticism of BTC is that it is volatile. And with an asset as volatile as BTC, it is impossible to run businesses or trade in the digital asset. However, the price has stabilized considerably in the USD 6,000 to USD 7,000 range. It hit USD 7,000 around March and has been relatively stable since, with one surge towards USD 10,000. Price consolidation could be a sign of maturity, and financial institutions may be more amenable to investment.
Institutional investors prefer private sales because, on exchanges, large price movements can affect the price of the asset itself, known as investment slippage. Obviously, there are also customizable deals that can be made privately. Aside from institutional investors, large miners also prefer to sell via brokers as opposed to exchanges.
This February, Morgan Stanley researchers proposed that the increase of institutional investors would hamper the crypto market. The crypto market would then behave like all the others, moved by large financial institutions instead of individuals who need to use BTC as an actual means of exchange for goods and services, its intended design.
Who owns all the Bitcoin?
It is not possible to know who owns a wallet address, but it is possible to see how many bitcoins are stored in certain wallet addresses, and how centralized wallet ownership is. Unseen institutional investment has certainly enabled many individuals to gain BTC quietly. A privacy coin matrix has been created to display these key metrics.
It is fair to say that, at this stage, most BTC is now owned by institutional investors, elites, and high net worth individuals. The average person is not holding any bitcoin, and even those who are invested will only have small amounts. In this respect, the goal of bitcoin to become a one world currency might already be over, as the polarity between rich and poor so clearly evidenced by the current wealth hierarchy may simply be reflected in the new technology.
On the other hand, the divide will likely not be as sharp and will still represent a shift, with many newly minted bitcoin millionaires. Additionally, widespread Bitcoin adoption will pave the way for other decentralized currencies which should serve to decentralize wealth further, before the professionalization of cryptocurrency gives wealth back to the already wealthy via complex trading mechanisms.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.