When Bitcoin was launched in 2009, it was known in narrow circles of tech-savvy people and crypto enthusiasts. At that time, the institutional adoption of cryptocurrencies could rather cause laughter and nothing more. Over time, the word “bitcoin” started to appear in TV series and on social media discussions, becoming familiar to the broader masses of people. It took over 10 years for crypto assets to become adopted by institutional investors. This trend was first noticed in 2017, and then in 2020 – 2021 during the bull run, lifting Bitcoin to its all-time high of over $65,000 in November 2021. This period is marked as the beginning of institutional cryptocurrency adoption.
Institutional Crypto Involvement
Here is how institutions use digital assets:
- Direct investments – companies buy and hold cryptocurrencies as part of their investment portfolios.
- Institutional crypto trading – buying and selling crypto by following a chosen strategy.
- Blockchain projects – some institutions invest in or collaborate with blockchain startups, contributing to technological advancements.
- Cryptocurrency derivatives – investors engage in trading crypto derivatives like futures and options to hedge risks or speculate on price movements. To trade crypto in large amounts, an investor should create a crypto institutional account on one of the specialized investment platforms.
- Staking and yield farming – institutions stake their crypto assets or engage in yield farming to earn interest or rewards.
- Integration into payment systems – tech and finance companies integrate cryptocurrencies into payment systems, allowing users to transact with digital assets.
- Some institutions invest in ICOs, acquiring tokens issued by new blockchain projects.
- Cryptocurrency market making – active traders with sufficient capital contribute to the market liquidity. Market maker services is the form of partnership between financial companies and cryptocurrency organizations.
What Attracts Crypto Institutional Investors
The establishment of regulatory frameworks provides a sense of security, addressing concerns about compliance and investor protection. Improved market infrastructure, including reliable custodial services and advanced trading platforms, enhances the operational environment for institutional participation.
The development of financial products tailored to institutional needs, such as crypto exchange-traded funds (ETFs), offers familiar and regulated entry points for institutional investors in cryptocurrency. Additionally, the potential for diversification, high returns, and participation in innovative blockchain projects make the crypto market attractive for institutional players.
Conclusion
Wrapping up, companies and businesses may use many ways to tap into the crypto market – participate in ICOs, invest, trade, provide liquidity, etc. What inspires them to join this sector is its promising future, improving infrastructure, regulation mechanisms, and the opportunity for diversification and participation in innovative projects. These mechanisms collectively create a more attractive landscape for institutions considering joining the crypto space.
