Crypto Market Leaders Differ on Pace of Inst Adoption. Who's Right?

Bitcoin is in the midst of a tremendous run that saw the crypto rise from $3,693.85 in January 2019 to as high as $13,880 in June. That’s an increase of over 275 percent in just six months. Many investors assume that institutional money has finally arrived and these big financial firms are the ones powering the leading cryptocurrency’s ascent.

However, Binance CEO Changpeng Zhao, popularly known as CZ, believes otherwise. In a recent interview with Bloomberg, the chief executive of the world’s largest cryptocurrency exchange by volume says that institutional investors are not responsible for bitcoin’s parabolic run as much as many think.

“We have not seen institutions growing faster,” said CZ. “What we’ve seen is pickup in both places. The number of institutions coming into this industry has not increased that tremendously in 2019 yet.”

Changpeng Zhao’s comments appear to be in contrast with reports provided by reputable institutional investors. It even comes into conflict with a recent report published by the Binance research department.

Grayscale Attracting More Institutional Money in Crypto

While CZ believes that retail investors are still outpacing their institutional counterparts, Grayscale is painting a picture that says otherwise. In the second quarter of 2019, Grayscale Investments attracted close to $85 million to its war chest. According to the digital investment firm’s report, 84 percent of the capital influx came from institutional investors, spearheaded by large hedge funds.

What’s interesting is that the inflow of fresh capital coincided with the bitcoin rally. During the second quarter, bitcoin rose from $4,092.02 in April to as high as $13,880 in June. That’s a whopping 239.2 percent increase in just three months.

Bitcoin rallying in the second quarter of this year | Source: TradingView

Grayscale is not the only institution embracing bitcoin and other cryptocurrencies. Close to half of institutional investors who participated in a recent poll revealed they’re willing to get skin in the cryptocurrency game.

Fidelity Investments Survey Shows Increasing Institutional Interest in Crypto Tokens

A report recently published by Fidelity Investments shows that institutional investors are considering cryptocurrencies to be part of their portfolios with some already owning digital assets. The report surveyed 441 U.S.-based institutional investors.

Results show that 47 percent of respondents reported that they see a spot for cryptocurrencies in their investment portfolios. In addition, the survey revealed that 22 percent of respondents already own digital assets or have exposure to them.

President of Fidelity Digital Assets Tom Jessop said:

"We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments."

Binance Research Department Echoes Fidelity Survey

The Fidelity survey supports the findings of a report published by Binance in Q1 2019. According to the research department of the largest cryptocurrency exchange, the first quarter saw renewed vigor in the cryptocurrency space. Institutional investors, which account for 10 percent of all long-term investors, are increasing their exposure to crypto tokens.

The Binance report stated that this was "illustrated by a premium of nearly 40% for Grayscale Bitcoin Trust (GBTC) over BTC spot price at the end of May."

Bottom Line: Evidence Suggests That Institutional Money Is Piling In

Changpeng Zhao may be playing a game to inject some degree of fear, uncertainty, and doubt. He may also be encouraging a healthy bitcoin correction. After all, the leading cryptocurrency has grown so fast in a relatively short period of time. Or perhaps institutions are just opening accounts on other platforms, not Binance and similar exchanges. The empirical data seems to point that there is an influx of institutional money going into crypto.

Institutional money is here, and it looks like it’s here to stay.

Last modified (UTC): July 22, 2019 7:38 PM

Kiril Nikolaev @kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk

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