The market declines that have affected cryptocurrencies this year have prompted many traders to express concern about the future value of the technology, but actions by players behind the scenes paint a very different picture. Interest from professional and institutional investors is growing swiftly, and the mood is very optimistic. This year has seen a myriad of such actors move into the space, and they are little concerned with the retracements of the past few months. These investors come from both the tech and finance world, and they firmly see a profitable future for themselves and their clients.
One of the earliest, and best-known institutional crypto investors, Andreessen Horowitz, recently announced a $300 million fund for cryptocurrency and blockchain interests. The group’s previous investments include Coinbase and Cryptokitties. This single fund is larger than many established blockchain platforms, and it is only one of many financial entities moving into the sector. Other interested parties include pension funds, sovereign wealth funds, and endowments. Collectively these groups control tens of trillions in global assets, and they have no intention of allowing the blockchain revolution to pass them by.
This activity should end any debate over the eventual recognition of cryptocurrency by governments. To be sure, state opposition has been a key barrier to institutional investment, but all evidence indicates that these investment funds soon intend to move into the crypto space, regardless of whether or not their lawmakers support it. Simply put, they are tired of waiting while others gain significant first mover profits. Once they have begun to acquire crypto assets, they are all but certain to begin pressuring their leaders for support, and given their significant influence, they will no doubt receive it.
Professional cryptocurrency investment is also reaching into individual and retail markets. For example, Blockchain.com has just announced Blockchain Principle Strategies (BPS), a platform it claims will provide comprehensive tools for all types of investors. In addition to market access, BPS intends to provide access to research and portfolio tools. BPS will be led by a team with experience from legacy firms such as Goldman Sachs, JP Morgan, and UBS.
In terms of the impact on global finance, institutional investment is expected to significantly alter the valuations of other asset classes. Wealth put into cryptocurrencies and blockchain platforms will not be created out of thin air. Rather, much of it will be taken from other sectors such as precious metals, bonds, and stocks. Thus, the growth of blockchain as an investment tool should best be seen as a transfer, or realignment, of one type of wealth to another. This fact underscores why dismissing the significance of blockchain could be a very costly mistake.
The growing interest by institutional and professional investors is clear evidence that the cryptocurrency revolution is still in its nascent stages. Just as blockchain has only begun to enter real-world use, managers of the world’s great sources of wealth are just starting to appreciate its legitimacy and value potential. Their interest, however, is rapidly growing, and promises to dramatically alter the global significance of crypto assets.
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