KEY POINTS
- Research suggested when institutional investors could allocate a small portion of their money to Bitcoin, the world’s first cryptocurrency could move past up $50,000
- This would put Bitcoin’s market cap above $1 trillion
- Among large investors, hedge funds would be the first to put money into cryptocurrency
A new research suggests that when institutional investors could allocate a small portion of their money to Bitcoin, the world’s first cryptocurrency could move past up $50,000. If they allocate at least 1% to Bitcoin, its market cap could be over $1 trillion. The study showed how large investors could move the Bitcoin markets in the direction they want with the funds they bring to the table.
On May 7, legendary hedge fund manager and macro investor Paul Jones announced he put 1-2% of his portfolio in Bitcoin as a hedge against inflation and the Fed’s incessant money printing. With Bitcoin recovering everything it lost in the March 12 crash and days ahead of the asset’s third halving, Jones said his bet will be in Bitcoin if he is forced to forecast.
“Bitcoin reminds me of gold when I first got into business in 1976. The best profit-maximizing strategy is to own the fastest horse,” he wrote in his market outlook letter “The Great Monetary Inflation.” He advised other institutional investors to consider the largest cryptocurrency because of its potential.
Ryan Watkins, analyst at Messari tested the hypothesis of institutional investors putting money on Bitcoin to find out the coin’s market value if it happens. In this scenario, he concluded that an aggregate 1% allocation from this group of investors will put Bitcoin’s market cap over $1 trillion, translating to $50,000 per BTC. The assumption is based on another research by crypto analyst Chris Burniske, who found out that in 2017, BTC price increased two to 25 times whenever a huge amount of fiat flowed into cryptocurrency in 2017, the year when Bitcoin hit its all-time high near $20,000.
Watkins said hedge funds would be the first to allocate funds into cryptocurrency. Despite sentiments that Bitcoin does not need institutions to succeed, the analyst argued the world’s first cryptocurrency must first convince these large investors to transfer their wealth into this nascent asset class.
An increasing number of products targeting institutional investors flooded in the last few years. For others, regulation is the only way for big money to come into crypto. As a testament, Coinbase and Gemini, two of the highest regulated exchanges in the world have institutional money under their care precisely because they allowed themselves to be regulated. Tyler and Cameron Winklevoss, owners of Gemini Trust Exchange, thought crypto still has trust problems. “You need some kind of regulation to promote positive outcomes,” Cameron said in 2019.
Also in 2019, Coinbase is reported to have $1 billion in institutional money through its Coinbase Custody service.