The Reluctance of Big Players
Despite the growing interest in cryptocurrency, big institutional investors remain largely aloof. According to Jared Gross from JPMorgan Asset Management, the main reason for this hesitation is the notorious volatility of assets like Bitcoin and Ether. He states that, for most large investors, crypto is almost non-existent as an asset class.
Volatility: The Great Deterrent
“The volatility is too high,” says Gross, capturing the sentiment that has kept large money managers at bay. Imagine investing your hard-earned cash, only to watch it tumble faster than a toddler on a balance beam! Institutional investors are relieved they haven’t jumped into these shaky waters, fearing the rocky ride of the crypto rollercoaster.
The Myth of Crypto as Digital Gold
Once upon a time, many believed that Bitcoin could step into the shoes of gold, serving as a reliable hedge against inflation. However, as Gross puts it, that notion has been put to rest in this bear market. With Bitcoin’s value plunging from $47,700 at the start of the year to below $17,000, the dreams of a virtual gold rush are now more like fairy tales.
Current Market Overview
2022 has proven to be a year of turmoil for the crypto market. Not only have investors seen significant dips in their holdings, but the total crypto market cap has dropped from $2.2 trillion to around $810 billion. Ouch! If anyone thought they could ride into the sunset with a satchel of crypto, the recent declines have been like a splash of cold water to the face.
But Not All Doom and Gloom
Despite the reservations, it’s not all bad news for crypto enthusiasts. Institutions are beginning to dip their toes into the shallow waters of cryptocurrency. Just recently, BNY Mellon, the nation’s oldest bank, announced services to safeguard Ether and Bitcoin for selected institutional clients. This decision was largely driven by “client demand,” as noted by CEO Robin Vince.
The Rising Popularity of Crypto
Interestingly, while institutional investors are still treading lightly, the general population seems to be warming up to the idea of crypto. A report by JPMorgan Chase reveals that around 43 million Americans—13% of the population—have owned crypto assets at some point. This is a significant rise from just 3% before 2020. It seems like everyone and their grandma is considering joining the crypto club!
Conclusion: The Future of Institutional Investment in Crypto
While the crypto market remains a wild ride, it’s clear that institutional sentiment is evolving. With some large financial institutions starting to embrace cryptocurrencies, we may just be on the brink of a new era. But for now, most institutional investors are content to watch from the sidelines—sipping their coffee and hypothesizing about whether Bitcoin is a digital gold or just fool’s gold.
