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Institutions Say ‘No’ to Crypto According to JPM Investment Strategist

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Frankfurt Financial Centre Institutional Investors

Institutions might not be interested in virtual currencies according to a JP Morgan Senior Investment Strategist. This is despite the fast growth that digital assets experienced in 2021. Nevertheless, there have been many companies investing in digital currencies in recent years.

Institutions Are Not Interested in Cryptocurrencies

Institutions are not interested in investing in digital assets. Indeed, cryptocurrencies are considered a nonexistent asset for large institutional investors. This is according to Jared Gross, JPM’s senior investment analyst. 

In 2021, we have seen Bitcoin (BTC), the largest cryptocurrency in the world, reach a new all-time high of $69,000 per coin. This came after years in which BTC reached $3,200 per coin (in 2018) and after multiple problems that affected the whole crypto market. 

Once Bitcoin surged to $69,000 in November 2021, the coin then entered a new bear market. This pushed the whole crypto market downwards. Indeed, multiple digital currencies, especially those involved in the decentralized finance (DeFi) market and multiple others disappeared or dropped by over 90% during the same period of time. 

In a recent interview with Bloomberg, Jared Gross explained that interest from institutions has either disappeared or never been there as many reported in the past. This shows that these companies and large investors have also been affected by the current bear market. A change in the monetary policy could also have a strong impact on how investors allocate their funds. Large institutions follow central bank decisions in order to make sure that they get enough returns to beat inflation. 

As per the analyst, some of the reasons that have pushed institutions out of the market included volatility, the massive decline of virtual currencies in 2022, and everything that happened in 2022. Let’s also not forget that this year, we have seen the Terra (LUNA) ecosystem collapse and the FTX cryptocurrency exchange collapse, creating multiple problems for investors all over the world, including larger institutions. 

On that matter, Jared Gross said:

“As an asset class, crypto is effectively nonexistent for most large institutional investors. The volatility is too high, and the lack of an intrinsic return that you can point to makes it very challenging.” 

Additionally, he mentioned that most institutional investors are relieved that they didn’t invest in digital currencies when the market was moving higher in 2021. Despite that, it is worth pointing out that already two countries have made Bitcoin legal tender. These two countries include El Salvador and the Central African Republic (CAR). Therefore, despite the bear trend that we have seen in digital assets during the last year, cryptocurrencies continue to grow and expand (in terms of use cases). 

According to the website Bitcoin Treasuries, Microstrategy is the largest holder of Bitcoin in the world (as a company). At the moment, the company is holding 130,000 BTC or 0.619% of the total Bitcoin supply. Other companies that have also been purchasing Bitcoin include Marathon Digital Holdings and Tesla. These two companies hold close to 10K BTC each and hold 0.047% of the total Bitcoin supply. 

There are many other companies around the world that have purchased Bitcoin and that openly hold and purchase digital currencies. In the future, we could see a large number of companies entering the market and getting access to BTC. Other virtual currencies could also be purchased. 

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