As the cryptocurrency industry continues to expand and attract new investors on a regular basis, a growing number of those investors are large companies and corporations. Here we look at what institutional adoption of cryptocurrency is and what it means for the future of crypto.
What Is Institutional Crypto Adoption?
While the larger, well-established financial institutions across the globe have previously chosen to not take cryptocurrency very seriously, a growing number of those financial institutions are now reversing course and pumping more money into the cryptocurrency market than ever before. In short, institutional adoption of cryptocurrency is simply the investment in cryptocurrency markets from large companies and corporations. As the trend continues, the cryptocurrency markets will be impacted in various different ways, with some of those effects still yet to be realized or discovered. Time will tell what the ultimate effects of institutional crypto adoption will be, but the influence is already being felt.
Effect Of Institutional Adoption Of Cryptocurrency
There are several main ways in which the effect of institutional adoption of crypto has impacted today’s crypto landscape, the most notable being valuation, hedging portfolios, and accessibility.
Part of the institutional adoption of crypto is the buying up of crypto assets with the intention of holding them long term. The trend in institutions holding an increased share of crypto without selling indicates the perception that the value of crypto will stand to increase over time.
The idea that the value of crypto will rise over time is also one of the reasons why institutions are now including cryptocurrency in their portfolios. The thought being, should the value of certain crypto continue its upward long term trajectory, it will help offset inflation.
As cryptocurrency becomes more institutionalized, more and more people will have access to crypto markets that they never had previously. Financial institutions like Charles Schwab and Morgan Stanley—to name a few—are making crypto purchases available to their users, which in turn is making crypto more accessible.
Emergence of “Crypto Whales”
Large companies purchasing large swaths of cryptocurrency is also creating a new phenomenon called “crypto whales,” whereby single entities are owning huge shares of a specific cryptocurrency or specific cryptocurrencies. This can be disruptive to the entire cryptocurrency industry because suddenly an entire currency could be controlled—and potentially manipulated—by a solitary organization. Like any other industry undergoing a consolidation of power, the more “crypto whales” in existence, the less opportunity there will be for your “average Joe” to enter the playing field.
The Future Of Institutional Crypto Adoption
As large financial institutions continue to enter the crypto arena and invest in currencies like Bitcoin—among others—their customers will have the increased ability to also enter the crypto arena and start their own individual crypto journeys. On the surface, it’s a win for all parties, but thing to be wary about in the years to come is the consolidation of a specific currency under one financial institution’s roof. Should that happen—and without a system of universal oversight or regulation—the opportunity for manipulative trading or a manipulated market increases dramatically. Ultimately, institutional adoption of crypto is a great advancement in the industry and should continue to help more and more crypto-enthusiasts begin their crypto investing adventures.
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