Why have Institutions been slow to warm up to Bitcoin?
Institutional Investors were all expected to flock to bitcoin starting in 2018, but it never really materialized...
Why is that?
For much of late 2017, all of 2018, and much of 2019 a lot of the talk has been about institutional investors coming in and taking bitcoin to new highs.
For whatever reason, it hasn't really materialized.
(Source: https://bitcoinist.com/bitcoin-price-22k-end-2018-tom-lee/)
There have been a whole host of reasons thrown out there as to why that is, and perhaps after today we can add a new one to the list...
According to Tom Lee of Fundstrat Global Advisors, he says bitcoin and crypto are still too small for most institutions to get involved.
With the total crypto market cap around $200 billion, it is small potatoes compared to the $8 trillion gold market, the $66 trillion stock market, and the $86 trillion bond market.
According to Lee, that is just too small for many of the big fish:
“There’s a mechanical issue for crypto in terms of infrastructure that’s needed but there’s probably also a size of market issue.”
“If you’re asking someone to allocate 1% to bitcoin — that’s like triple the market weighting, like you’re asking someone to make a massive bet even though it’s 1% of their assets because bitcoin is that small.”
(Source: https://bitcoinist.com/tom-lee-bitcoin-btc-is-still-too-small-for-institutions/)
So, we still have a size issue according to Lee, which ironically is kind of a 'chicken or the egg' sort of thing.
The market needs to be bigger in order to attract the large institutions, but the market likely needs these institutions to invest in order to get bigger.
Which is going to give first?
It's not just the size that's an issue though...
It's how you use it! (just kidding)
There are still major regulatory uncertainties that are overhanging the crypto markets.
We have a lack of clarity from regulators in a number of jurisdictions as to which tokens are or aren't securities, as well as couple other gray areas which is giving investors pause.
We also have a lack of clarity on taxes in many places, or outdated taxes that don't really make sense in the current crypto markets.
Hopefully we can get some clarity on these in the near future as that may help get some of the big boys in, which is likely would we need to push bitcoin to new highs.
Stay informed my friends.
-Doc
They're scared we're going to sell our BTC after they buy and they don't want to experience the emotions involved with having to survive the lows of BTC bear markets...
Ha, I am sure they don't like feeling they are "late" to the party. Though if they really dig in and look how things have progressed so far, $8k might be incredibly cheap several years from now if things keep growing at the current pace.
Whether they feel late to the party or not, they want to buy in at around $1k. To them, it's more about verbalizing the price point they got in at. They want the feeling of being able to say they called the low and got in cheap...That way when they're doing lines with their buddies up in the Hamptons, they can say look we're not idiots after all.. and ultimately they have the cash to play the waiting game
Once the custodial issues is resolved, you will see more Smart Money enter the space.
Hopefully. Though we have seen some very good options pop up over the last year and institutions are still very slow to move in. I think we need regulatory clarity as well. Trump and the Treasury Secretary talking about how much they dislike it probably didn't make them feel any more comfortable.
Excellent focused analysis again!
It could be that many of us in this (Crypto) community have unrealistic expectations about how long adoption will take. Whatever "adoption" means.
We are experiencing a momentous paradigm shift.
Such shifts have not occurred often in human history. Think of the printing press, electricity, television as examples.
The complications here involve direct threats to Governments anywhere - the ability to control (manipulate) exchange rates and levy tax.
What about impact on Paypal, Visa, Mastercard, Facebook et al.
Then there is privacy.
Will quantum computing crack encryption?
Brave new world we participate in folks.
Very good point. There is no guarantee crypto in its current form will be around in 10 years. That gives large investors reason to be cautious. If the US government would show support for bitcoin I bet many here in the US would jump in. The fact they have been somewhat negative towards bitcoin, doesn't help.
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