Posted By

Over a decade since the invention of bitcoin and cryptocurrency is thriving. It’s currently sitting at a market cap of close to 1 trillion, whereas the value of all cryptocurrencies combined is now over a quarter of a trillion dollars. After the digital asset’s amazing rise from obscure cryptography into a vast digital ecosystem worth billions, it seems like the bitcoin threshold will finally be broken thanks to institutional adoption.

The rise of bitcoin

There are many factors that have contributed to the rise of bitcoin. Powered by a combination of the internet, unbreakable cryptological math, and deflationary protocols, bitcoin hasn’t experienced a serious issue with security in over a decade. Plus, Cryptocurrency exists outside of the Federal Reserve and the stock market and is easier to access and transfer than cumbersome gold. In fact, perhaps now more than ever before, bitcoin is the perfect digital gold that works as a hedge against erratic monetary policies and inflation.

While bitcoin hasn’t altered much at its most basic level, the world around it has changed drastically, especially over the last 12 months. This has actually worked in the cryptocurrency’s favor, causing bitcoin to hit a record $20K for the first time on December 16. This historic milestone happened merely two weeks after the world’s most popular cryptocurrency broke its previous all-time record. And BTC could soar even higher still thanks to increasing institutional demand, growing perception among investors of bitcoin as having stronger network fundamentals and a store of value.

Institutional interest is on the rise

Institutional investors first started showing some interest in the cryptocurrency during 2018, which increased somewhat during 2019. However, it was 2020 that ended up becoming the defining year for bitcoin’s institutional adoption which is continuing today. Investors Antoine Bechara says, “What we’re seeing is the broader adoption of the BTC digital gold story, which started resonating with institutional investors during the pandemic, such as hedge funds, celebrities, and the ultra-rich.” So it’s this Institutional demand and the broadening of clients engaging within the ecosystem together that seems to be responsible for fuelling the current bitcoin rally and creating this watershed moment.

That’s because ever since the cryptocurrency was first launched, major banks and wall street investors alike were all extremely dismissive of bitcoin. These same big bank analysts are forecasting bitcoin will become a substitute for gold, but they also project that the recent institutional investments in bitcoin will see billions more invested. Now that an increasing number of institutional investors seem to feel that cryptocurrencies actually do have a place within their portfolios, a growing number of these top-tier banks are readying themselves for the growing institutional demand by beginning to offer cryptocurrency services. All of this seems to signify a huge shift in the perception of bitcoin as a currency.

Mainstream acceptance is inevitable

The reason mainstream and institutional adoption has been so important to cryptocurrencies like bitcoin is that they aren’t backed up by any assets like gold and other investments. They also don’t have the full backing of any federal government like currency. The only reason cryptocurrencies are valuable is that people believe in their value. When some of the biggest trading names on Wall Street start investing in bitcoin, it goes a long way towards mainstream acceptance of the cryptocurrency.

As the ongoing adoption of bitcoin continues to spread from day traders and wealthy investors to pension funds and large insurance firms, there’s a massive potential for the cryptocurrency to see additional institutional demand in the years ahead. That being said, analysts certainly don’t expect big investment firms and investors to dive into cryptocurrency with overly heavy weighting. But, if they were to allocate even a small portfolio of their assets into BTC, for example, it would create a significant result of additional market demand for bitcoin at approximately $600 billion.

Final thoughts

The 21st century digital gold reputation of bitcoin has grown considerably over the past year. And now that the institutional adoption of bitcoin is upon us, mainstream adoption for BTC and the cryptocurrency market as a whole shouldn’t be too far behind. And whenever bitcoin surpasses its all-time-high once again, it’s going to be even harder for investment banks and governments to dismiss it as just another mere bubble. 

Luke Fitzpatrick

Written By Luke Fitzpatrick

Luke Fitzpatrick has been published in Forbes, Yahoo! News and Influencive. He is also a guest lecturer at the University of Sydney, lecturing in Cross-Cultural Management and the Pre-MBA Program. You can connect with him on LinkedIn.

Recommended for you