Bitcoin traders and investors have long predicted the established financial service industry’s eventual jump into cryptocurrency.
Wall Street’s highly-anticipated institutional support for bitcoin has so far failed to convincingly materialize, though recent moves from some of the world’s biggest banks suggest it’s coming—slowly but surely.
Now, following hedge fund manager Paul Tudor Jones’ recent foray into bitcoin, researchers have found an aggregate 1% institutional allocation to bitcoin “can easily” bring bitcoin’s total value above $1 trillion—with a “perfect storm” potentially making each bitcoin token worth over $50,000, up from just under $10,000 currently.
The bitcoin and cryptocurrency community has been closely-watching for signs Wall Street is gearing … [+]
“Institutional investors are the white whales of cryptocurrency,” Ryan Watkins, an analyst at bitcoin and crypto research firm Messari, wrote in recent report, adding that, “depending on your assumptions, an aggregate 1% institutional allocation to bitcoin can easily bring bitcoin’s market cap above $1 trillion.”
“Ever so elusive, institutional investment in cryptocurrency has long been considered the most significant barrier between bitcoin and a multi-trillion dollar market capitalization.”
The bitcoin and cryptocurrency community was set alight last month by news investment giant Paul Tudor Jones’ would be buying bitcoin as a potential hedge against the inflation unprecedented central bank stimulus measures could bring, causing Watkins to ask: “What would it look like if institutional investors followed Paul Tudor Jones and allocated a ‘low single-digit percentage’ to bitcoin?”
“[Bitcoin] is a great speculation,” Jones, the founder and chief executive of Tudor Investment and widely considered one of the world’s most influential macroeconomic traders, told CNBC, adding he has “just over 1% of my assets in bitcoin. Maybe it’s almost two. That seems like the right number right now.”
Watkins found fiat flows into bitcoin typically drove price gains of between two times and 25 times during bitcoin’s epic 2017 bull run, pointing to research by Chris Burniske, the cofounder of crypto-focused venture capital firm Placeholder.
“While hard to estimate, Burniske’s illustrative range from 2x-25x provides a picture of potential outcomes if institutional investors began to accumulate bitcoin,” Watkins said via Twitter.
“Flows into and out of an asset do not necessarily result in one-to-one moves in the price of the asset, and can be amplified into much larger price movements.”
Researchers asked, “what if institutional investors allocated 1% of assets under management to … [+]
Expectations that institutional investors could be about to buy into bitcoin and cryptocurrencies is thought to have contributed to bitcoin’s 2017 price explosion, which saw the bitcoin price rise from under $1,000 per bitcoin to around $20,000 in under 12 months.
These hopes petered out through 2018 but have recently returned, with some, including co-founder of social news aggregation site Reddit and early investor in major U.S. bitcoin and crypto exchange Coinbase, Alexis Ohanian, recently predicting a new bitcoin and “crypto spring.”
“In anticipation of [institutions’] hopeful arrival, firms have raised more than $1 billion in order to build infrastructure to serve them,” Watkins wrote. “And deal activity is picking up as the perfect storm appears to be brewing for investment in bitcoin.”