Institutional investors have played a key role in driving global crypto adoption, pushing digital assets into the mainstream.
Roughly 7.5% of the world’s population has used digital assets, with that number expected to reach 8% by next year, according to a report from MatrixPort. The launch of bitcoin and ether ETFs earlier this year drew billions in investments from major financial institutions like BlackRock, Fidelity, and Franklin Templeton.
Bitcoin has maintained its position as the flagship cryptocurrency, hitting an all-time high earlier this year. Aside from institutional investing, another factor driving its rise is its value as a hedge against the stock market during uncertain economic times.
“According to BlackRock’s research, Bitcoin has a low long-term correlation with stocks and bonds—with periods of dislocation—so it can serve as a great portfolio balancer,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Bitcoin also acts as a hedge to fiscal, monetary, and geopolitical risks.”
“During the United States/Iran escalation a few years ago, COVID-19, the previous United States election cycle, Russia’s invasion of Ukraine, and last year’s United States regional banking crisis, bitcoin returned an average of nearly 44% on a 60-day return basis,” he said.
Here to Stay
Although crypto is increasingly seen as a hedge against market volatility, digital assets have faced their share of uncertainty, especially in America. Because digital assets are traded on decentralized exchanges, criminals have used crypto platforms for fraud and other illegal activities.
The potential for criminal activity has led many American regulators to crack down on crypto and hold digital assets firms accountable to the same laws as brokerage firms. Instead of taking action against crypto companies, the United Kingdom and European Union have instead worked to create a better regulatory framework to guide investors and the crypto industry.
The backing of investors, governments, and the growing crypto community means digital assets are here to stay.
“Bitcoin’s price has a strong correlation to global money supply, and some refer to bitcoin as the global liquidity index,” said Hugentobler. “Bitcoin therefore is a solid hedge to fiat currency debasement, also known as inflation.”
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Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
