Institutional and retail investors see Bitcoin’s price differently
Bitcoin has been in a virtually unstoppable rally since October 2020, with the cryptocurrency hitting a high of more than $ 58,000 a few weeks ago. To date, however, the market-leading digital asset was trading for around $ 48,400, after a serious attack of volatility. It can be argued, however, that the aforementioned figure is still a relatively high price for most retail investors to consider an investment.
However, macro investor Raoul Pal feels differently, recently stating that Bitcoin’s “high price” is just one retail mindset, and institutional investors do not see it in the same way. This allowed a comparison between the current Bitcoin high and that seen in 2017-18. While the latter was mainly aimed at retail, institutions are the main market participants at this time.
On a podcast exploring what traditional investors think of Bitcoin, Pal told Peter McCormack that, for institutions, the price is relative. Institutions are more concerned with the adoption rate, the state of the regulations and what the current market capitalization is. According to Pal, the further it rises, the more Bitcoin’s market capitalization makes it available for purchase. He explained:
“Price is a function of this growing market capitalization … but if you were BlackRock, you wouldn’t have looked at it until you reached this market capitalization of almost a trillion dollars.”
In his opinion, traditional investors do not usually buy a Fortune 500 company in the expectation of how much the price will increase. Rather, what concerns them is what are the portfolio diversification effects that a particular stock will have and how it behaves throughout the market cycle.
Pal believes that a trillion-dollar market capitalization implies a structural change in the market and the type of market participants in the crypto space.
“When it is a $ 10 trillion dollar asset, it will not be set to zero. Because $ 10 trillion dollars belongs to individuals, pension plans and corporations. ”
Pal concluded by arguing that the current state of the market looks “technically perfect”, has a good roadmap and good seasonality, and the only real thing that prevents an institutional wall of money from entering is the fact that these large institutions need time to build an infrastructure to manage your crypto-positions.
“If you can’t find conviction here, you will never find it. This is the perfect storm for Bitcoin. ”