Bitcoin market's institutional investment has significantly risen

Since Bitcoin reached an all-time high in 2017, although its price has dropped by nearly 52%, institutional investors' interest in Bitcoin has significantly risen.

The three major factors driving institutional capital into the Bitcoin market in 2020 include: the positive attitude of well-known investors and institutions, the gradual maturation of the Bitcoin market, and the continuously strengthening fundamentals.

The asset management scale of a certain Bitcoin trust fund ( AUM ) is often regarded as an important indicator of institutional investor participation. In the United States, due to the lack of Bitcoin ETFs, institutional investors primarily invest through exchange custody and this trust fund.

As of June 23, 2020, the AUM of the trust fund exceeded $3.5 billion, nearly 20% higher than when the Bitcoin price hit a record high in 2017. Even more noteworthy is that 88% of the fund's investments in the first quarter of 2020 came from institutional investors, far exceeding the 56% in the first half of 2018.

This data change indicates that large institutions are gradually entering the Bitcoin market. In the coming months, shifts in the attitudes of major financial institutions may further stimulate institutional investment activities.

Recently, some large financial institutions that were originally critical of Bitcoin have begun to change their stance. An analyst from a major investment bank believes that Bitcoin has "strong momentum" and states that its trading price rarely falls below production costs, even during the extremely turbulent market conditions in March of this year. The investment bank has also opened bank accounts for some cryptocurrency exchanges, increasing support for this industry.

Some well-known investors have also begun to recognize Bitcoin's potential as a hedge against fiat currency inflation risks. A certain famous investor revealed that they have allocated 1% of their net worth to Bitcoin.

The continuous maturation of the Bitcoin network is another important factor attracting institutional investors. From June 2019 to June 2020, the hash rate of the Bitcoin network ( rose from 57 million TH/s to 105 million TH/s. Even after the halving event in May this year, the hash rate of the Bitcoin network quickly rebounded, demonstrating strong resilience.

In addition, the decrease in Bitcoin reserves at cryptocurrency exchanges is also seen as a positive signal, indicating a reduction in retail investors and a potential increase in the proportion of institutional investors.

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However, not all financial institutions are optimistic about the long-term prospects of Bitcoin. A large investment bank stated that hedge funds trade cryptocurrencies mainly for their high volatility, rather than as a long-term investment.

Overall, there is still a divergence among institutions and high-net-worth investors regarding the future development of Bitcoin. Some believe that Bitcoin will evolve into a mature store of value and a reliable safe-haven asset, while others anticipate that its growth potential will be limited. For investors, maintaining a long-term hold in the absence of significant changes in the asset's fundamentals often results in maximized investment returns.