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Institutional interest for Bitcoin at its All-Time High

Photo of: Nathan VDH
by Nathan VDH

The rate of adoption of Bitcoin by institutions accelerated sharply in Q4, influencing the course of the cryptocurrency according to JPMorgan. For asset manager Fidelity, 2020 is a decisive period for these investors.
Several factors explain the current rise in the price of Bitcoin and bring it closer to its historical high. These include the launch by PayPal of a cryptocurrencies service, which is likely to promote the democratization of Bitcoin.

But the adoption by institutions is perhaps an even greater factor. In its “Flows & Liquidity” report, the investment bank JPMorgan also notes a clear acceleration in the acquisition of Bitcoin.

And this increase is particularly tangible in the fourth quarter of 2020 compared to the previous three months. According to its financial analysts, institutional investors thus consider Bitcoin to be a long-term investment.

To support this analysis, the bank relies in particular on the strong growth recorded during the quarter by the Grayscale Bitcoin Trust. This colossus of crypto finance recently exceeded 500,000 Bitcoin under management. The majority of Grayscale’s clients are institutional clients.

However, the adoption of Bitcoin is also progressing on the retail side, albeit at a slower pace. In Q3, 1.6 billion dollars of cryptocurrency was acquired through Square’s Cash App.

This was three times the amount invested in Grayscale Bitcoin Trust. In Q4, these amounts were multiplied by three for the asset manager. But JPMorgan is not the only one to make this observation.

For Fidelity Digital Assets, the adoption of cryptocurrencies by institutional investors is mainly explained by the current economic context and the pandemic. For one of these leaders, 2020 marks a “decisive moment” in the institutional adoption of Bitcoin.

“What we saw in 2020 was a broader adoption of the digital gold story, which began to resonate with other groups of institutional investors, namely hedge funds, high net worth individuals and, subsequently, family offices,” said Sandler.