Institutional Investor Interest in Bitcoin Continues to Grow

In 2021, the interest of large institutional investors in Bitcoin has increased even more. It is noteworthy that heincreased not only during the first bull run at the beginning of the year, but also in the second and third quarters, when the price fell and stagnated.

Much of this interest is likely to stem from the launch of new financial products in traditional markets that allow Bitcoin's price to be determined without even owning it.

Most widely used toolis still the Grayscale Bitcoin Trust (GBTC), a fund backed entirely by physical BTC that converts into an ETF on the New York Stock Exchange. That's why Morgan Stanley decided to use this vehicle to invest $300 million in Bitcoin in the third quarter.

The first Proshares Bitcoin Strategy ETF (BITO),approved by the US market to replicate the price of BTC and launched last month on the New York Stock Exchange, it is based on futures contracts on the price of Bitcoin. The product was expected to be an immediate success because it allowed one to take a position on the price of BTC using tools already used by investors.

Thanks to these tools, Bitcoin has become an assettaking a share in the portfolio of many investors, including institutional ones. Its peculiarity is that it is used instead of gold to hedge risks from inflation.

Thus, it is a complementary tool for investors who have complex investment strategies rather than just trying to buy assets at low prices and sell them at higher prices.

Professional investors, and especiallyinstitutional investors are not afraid of risk, and risk management is often their best weapon. In this scenario, BTC manages to find a place for itself even in those traditional financial markets dominated by large institutional investors.

For example, bond mutual funds are noware dealing with very low real returns due to rising inflation and even gold cannot provide high returns. Bitcoin can also become part of their portfolio as a risky investment that can offset the extremely low returns of risk-free investments.

Equity funds are most vulnerable to the impact of BTC, probably because a possible rise in interest rates due to rising inflation could lead to a drop in the prices of their portfolios in the medium term.

The bitcoin market is quite young, largely immature, volatile, and it is these qualities that often attract investors who prefer the increased risk of low profitability.

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