Bitcoin’s volatility is scaring off new institutional investors, but those who have already entered the sector continue to accumulate by taking advantage of contractions
Given the ongoing bullish trend, several institutions from the world of traditional finance have tried to ride the crypto wave. For one, over the past few months, open interest and trading volume in Bitcoin futures have increased significantly. While this is a predictable development, another change has surprised the crypto industry: the Chicago Mercantile Exchange, a global derivatives exchange, has recently become the largest trading platform for Bitcoin futures in the world.
In this regard, data published by crypto analytics platform Bybt indicates that the CME accounts for $2.4 billion of the $13 billion total open interest in Bitcoin futures, followed closely by cryptocurrency exchange OKEx, with a total of $2.17 billion and ahead of other major names such as Binance, Huobi and Bybit.
It should come as no surprise that since December last year, Bitcoin’s (BTC) parabolic growth has increasingly attracted the attention of investors around the world. To put things in perspective, despite BTC’s recent correction that took the asset below $32,000, the cryptocurrency has rebounded to well above $38,000, thus posting a net profit of about 95% in 30 days.
Is institutional interest rising or is stagnation approaching?
Recent volatility has created concerns regarding the sustainability of the current bull market, raising questions about a possible decline in institutional interest in Bitcoin. As Konstantin Anissimov, general manager of UK cryptocurrency exchange CEX.IO, explained to Cointelegraph, it is important for newcomers to realize that the issue is not simply about institutions entering the market, but rather reducing the risks associated with it:
„Unless something really drastic happens to turn the whole market around, and it’s hard for me to imagine something so negative, I think in the future more and more large companies will continue to invest in Bitcoin and other cryptocurrencies.“
Quinten Francois, host of the Young and Investing YouTube channel, believes that most of the action-seeking institutions have already made their entry, adding that during parabolic phases like these, it’s hard to imagine more big, wealthy names coming into the sector, at least until the end of the year when things become more stable.
That said, he added that many of the institutions that have invested in the crypto sector now are probably accumulating, using the contractions to their advantage. When they reach their desired positions, retail money will slowly pour back into the market, pushing the value of BTC even higher:
„Smart money investors know what they’re doing; they’re not buying during parabolic movements.“
Jonathan Leong, CEO of cryptocurrency exchange BTSE, further explained to Cointelegraph:
„The institutional influx into cryptocurrencies is only just beginning. The rapid increase in the price of Bitcoin and other cryptocurrencies during Q4 has a direct correlation to this institutional influx or the expectation of such an influx.“
Will institutions reduce market volatility?
Bitcoin is undoubtedly a much more mature asset than it was during the bearish phase of 2018, especially with regard to the significant regulatory advances made in some jurisdictions. Moreover, today’s crypto market welcomes a considerable number of professional trading houses and non-crypto firms.
According to Anissimov, these factors can contribute significantly to mitigating Bitcoin’s volatility and increasing its liquidity as an investment asset:
„Institutional investors are not the key to sustaining Bitcoin’s bull run, but rather a path through which this market can be mitigated, becoming more stable and efficient.“
That said, the arrival of established institutions will have an effect on the price of most cryptocurrencies. This could help the industry as a whole, especially considering that many traditional finance players will be focusing on long-term investments, protecting Bitcoin from collapses similar to those seen in 2018.
Recent moves are noteworthy
Earlier this month, CoinShares, a European crypto finance and exchange-traded product company, announced that it had successfully brokered an exchange of over $202 million in XBT (Bitcoin) certificates on the first day of the market in 2021. The provider of former