Top 4 Reasons Why Institutional Investors Keep Buying Bitcoins

Bitcoin has passed the point of no return in 2020.

Bitcoin's bullish rally, which began in the fall of 2020, is taking place understrong pressure from institutional demand. You've probably read about this before. So in this sense, I will not reveal any secret to you here.

This rally, which took the price of BTC from $10.5K to $41K in just a few weeks, has nothing in common with the 2017 rally.

At the heart of that rally was an influx of retailinvestors. A FOMO effect arose, which allowed the price of BTC to reach $20 thousand. The problem with this influx of retail investors was that they did not have an accurate understanding of Bitcoin or even just why its price volatility is a “feature, not a bug.”

Retail investors are more likely to let emotion take over logic.

Therefore, as soon as the BTC price underwent the firstbig correction, the vast majority of newbies started selling at a loss the bitcoins they just bought in FOMO mode. This triggered the start of a large-scale bear market that lasted throughout 2018 and early 2019.

At the end of 2018, Bitcoin bottomed out at $3.2K.

Despite the fact that the speculative bubble formed inwhile around the price of BTC really burst, the bitcoin revolution went on as usual and did not think to stop. Bitcoin is not a speculative bubble, but a needle that will burst the bubble of the current system in which the US dollar reigns supreme.

For several months now, massdistrust of the US dollar. The thousands of billions of dollars “printed” over the past few months, literally “out of nothing” by the Fed and other central banks, have left their mark on the minds of investors. Everyone is looking for ways to hedge the risks of the slow but sure collapse of the existing financial system.

This is what interest is based on.institutional investors to bitcoin. Bitcoin is a lifeline, grabbing which they retain the chances of not sinking along with the current monetary and financial system.

Their clients want access to bitcoin

The first thing to consider is thatinstitutional investors' clients are well aware of everything that happens. Many see the US dollar's monetary inflation damaging their hard-earned cash savings.

They all want to protect themselves from this great monetary inflation. Many people understand that gold as a store of value is out of date. They learn more about Bitcoin every day.

Most importantly, they see that the price of bitcoin is everythingin 12 years has grown from zero to 40 thousand dollars. They do not want to miss the opportunity to invest in an asset that has every chance of becoming the most effective investment instrument in the next decade too. These investors are now demanding access to bitcoin from investment fund managers.

The arguments are not hard to guess.They say they've heard big names in traditional finance buying bitcoin instead of gold. They say Bitcoin is version 2.0 gold. They want to be part of a big bitcoin adventure.

There will be an incredible number of big names in 2020from the world of traditional finance, it has been publicly expressed that bitcoin will replace gold in the minds of people in the coming years as a favorite store of value. Legends such as Paul Tudor Jones, Stanley Druckenmiller, Ray Dalio and Bill Miller prophesy a royal future for Bitcoin.

Banks like JPMorgan, Citibank and DeutscheBank is also in the game. Hedge funds, insurance and investment companies too. BlackRock, Mass Mutual, Guggenheim, Fidelity, and many more will eventually buy Bitcoin too.

Under these conditions, institutional investorsbuy bitcoins in large quantities for the long term. And these buyers do not intend to dump their BTC in a panic as soon as the price corrects by 30-40%. They are not retail investors who let emotion take over logic.

Institutional Capital Managersbuild long positions based on the fact that the price of bitcoin will reach 100 thousand, and then, by the end of the decade, and 500 thousand dollars. This explains why they buy BTC each time the price falls, which could otherwise lead to a deeper correction.

Institutional investors' appetite for bitcoin seems to be truly limitless.

The effect of no alternative

Coronavirus pandemic sweeping the world from the beginningMarch 2020, triggered an economic crisis unparalleled in decades. The largest central banks in the world immediately reacted to it in the same way as in 2008.

The Fed has decided to conduct an aggressivemonetary policy with interest rate cuts to zero and an unlimited quantitative easing program, as a result of which the US central bank issued over $ 3,500 billion in circulation in just a few months.

In just those few months, central banksworldwide, more than 12,000 billion dollars have been issued in circulation. The level of public debt of the world's largest economic powers has de facto increased sharply. By the end of 2020, the amount of global debt reached $277 billion.

Institutional Investors Seek Opportunityhedge against this huge monetary inflation by investing in assets that offer attractive returns. They first turned to the stock market. This helped create a real technology bubble.

The Dow Jones and S&P 500 indices reachedrecord levels, demonstrating the complete lack of any connection between Wall Street and Main Street. The American stock market is under the strong influence of FOMO and lack of alternatives. Now that the stock market is clearly overvalued, institutional investors have had to turn to another asset.

And this is Bitcoin.

As the Winklevoss brothers said in November when BTCwas trading around $19K, Bitcoin could see 25x gains from that level over the next ten years. And this could also likely contribute to the ultra-positive view of Bitcoin among professional investors.

The situation is now clear:there is no alternative to bitcoin for institutional investors. This is why I put the effect of no alternative in the headline. As long as institutional demand is at this level, the bitcoin price is unlikely to go into a large-scale correction of more than 40%.

Bitcoin is causing a stir

As a bitcoiner, I am completely convinced ofthe bitcoin revolution taking place before our eyes. I have been buying bitcoin in dollar value averaging mode for many years now. Bitcoin is a paradigm shift aimed at building a better world of the future for as many people as possible.

As you can imagine, institutional investors don't come for bitcoin for this purpose.

For them, Bitcoin is a financial investment, likeand any other, the advantage of which is that a rush demand is created around it. They want to be among those who will benefit the most from the Bitcoin Revolution. However, they are only interested in the financial side of the issue.

The fact that Bitcoin protects your wealth fromany censorship, they don't care. For them, this is just one of the features of the instrument, however, of little interest. The only thing that motivates institutional investors is seeing the price of BTC go from $ 7.2 to $ 40,000 in just a year.

Even better:they understand that the prospects for Bitcoin in the coming years are even more phenomenal. They know that the hype around Bitcoin will eventually attract crowds of retail investors. As a result, the price of BTC will enter a positive feedback loop that will take it to at least $100k by the end of 2021.

And this is the best motivation for institutional investors to buy up huge amounts of bitcoins in the long term.

People want to hedge against huge monetary inflation

Thousands of billions of dollars printed "fromnothing ”by the Fed and other central banks are leaving their mark on the minds of investors. As well as the sharply growing public debt figures around the world. The current monetary and financial system suffers from seven deadly sins that will sooner or later lead to its collapse.

Today everyone understands this. We are seeing a real loss of confidence in the US dollar and the fiat system.

The best way to protect yourself from this collapsethe US dollar is buying the best hedging asset available. And that's Bitcoin. Institutional investors are becoming increasingly aware of this. Large companies also opt for bitcoin as a reserve asset.

In my opinion, in the coming months, the developmentthe situation will accelerate even more. 2020 will be a turning point in the perception of Bitcoin by institutional investors. There is no turning back. This explains the explosive growth in demand for bitcoin in recent months.

What sets Bitcoin apart from other assets isthat when the demand for it rises sharply, the supply nevertheless remains unchanged and is limited to 21 million units. In addition, the issuance of new coins cannot be accelerated either, because it obeys the monetary policy written in the Bitcoin program code. These very specific properties of bitcoin increase its scarcity and, as a result, the value of the units already in circulation.

If you have BTC, the best thing you can do with it is to keep it safe.

Finally

Institutional investors are well aware of thewhat purpose are they buying BTC. The bullish rally we've seen since November 2020 is a response to this incredible acceleration in institutional demand for Bitcoin.

The situation will not change in the coming months.Most interestingly, when retail investors come in droves for bitcoin, its price will still be well above the previous 2017 bull market high. The influx of retail investors then quadrupled the price of BTC in just a few weeks.

So the target level of $ 100K is upthe end of 2021 remains relevant as ever. The best bitcoin holder can do today is act like a true hodler in order to get the most out of what Bitcoin has in store for all of us in the months and years to come.

 

The article does not contain investment recommendations,all the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently.

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