Institutional Adoption Shines Hope on Bitcoin


Author: Michael Stern

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Bitcoin (BTC) was recently back above $30,000 after losing the crucial foothold on Monday.

With crypto markets still looking wobbly after last week’s crisis on the Terra blockchain, any signs of stabilization should be heartily welcomed by bitcoin bulls. Arcane Research, a Norwegian cryptocurrency analysis firm, wrote Monday that the market could get a jolt of fresh energy if bitcoin ends the week at over $32,000.

golden bitcoin symbol

Current Prices In The Cryptocurrency Market

For the time being, though, “there is little reason to argue that a prolonged rise will follow the current buying, as the fundamentals (tightening markets, slowing economy) remain in place,” Alex Kuptsikevich, FxPro senior market analyst, wrote in emailed comments.

Ether (ETH) added 2.2% in the past 24 hours to trade above $2,000, with similar gains for Avalanche’s AVAX, BNB Chain’s BNB, and dogecoin.

Polygon’s MATIC (MATIC) gained 5.5% as Polygon Studios CEO Ryan Wyatt said the firm was working with Terra projects affected by last week’s implosion and would connect them to Polygon’s broader DeFi (decentralized finance) network. Terra held billions of dollars in value on various DeFi applications, such as Anchor, before last week’s fall.

In traditional markets, U.S. stock futures were higher ahead of Tuesday’s exchange open in New York, along with gold. The yield on the 10-year U.S. Treasury note was up 0.04 percentage point to 2.92%. The U.S. dollar index (DXY) was down 0.8%.

The uplift in global markets came as traders priced in expectations of relaxation of rules in Shanghai after weeks of strict lockdowns, leading to a bump in Chinese stocks. Policymakers in Beijing are taking steps to alleviate the economic slowdown, with various moves in the past week while investors – especially those who trade with TD Ameritrade and Bitpanda – are getting more worried about their next move.

Insights On “Institutional Adoption”

Traders could get fresh clues on U.S. central bankers’ latest plans to tamp down fast-rising inflation from a 2 p.m. ET (18:00 UTC) appearance by Federal Reserve Chairman Jerome Powell.

A key narrative in the crypto world in 2021 was the arrival of institutional investors to the market. Tesla (TSLA) bought $1.5 billion worth of bitcoin and Wall Street banks like JPMorgan Chase (JPM) and Morgan Stanley (MS), as well as hedge funds, started to allocate clients’ assets to bitcoin.

That was a sign of growing mainstream acceptance, and it appeared to drive up prices. Crypto boomed with the sector’s market capitalization growing 185% last year.

Now, as the crypto market’s latest swoon wipes off $1.25 trillion from the industry’s all-time high market capitalization reached late last year, the question is, what role is institutional money playing in the crash? Or to put it more bluntly, are institutional investors making things worse?

Well, one thing we know: The crypto market is increasingly correlated to the stock market, and institutional investors appear to have heightened that correlation. And when the stock market goes down, it takes crypto with it.

The influx of institutional interest in BTC, which started to pick up in early 2020 with public declarations of interest from stalwarts of traditional investing, such as Paul Tudor Jones and Renaissance Technologies, coincides with a sustained jump in the 60-day correlation between BTC and the S&P 500,” a report in April by Genesis Trading stated. (Genesis is a subsidiary of Digital Currency Group, which also owns CoinDesk.)

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Michael Stern is a calculated risk taker with deep technical insight into digital currency and the development of strategic strategies.