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October 5, 2022
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Institutional investor interest in Bitcoin is still growing

Financial Products That Raised Interest in Bitcoin From Institutional Investors

Interestingly, it not only increased at the beginning of the year during the first bullfight, but also increased in the second and third quarters when the price dropped and lateraled for a while before starting the second bullfight.

Much of this interest rate hike is likely due to new financial products being issued in traditional markets to allow people to take a stand on the price of Bitcoin even without owning it.

Probably the most used instrument is still the Grayscale Bitcoin Trust (GBTC), that is, a fund fully backed by physical Bitcoin, which is being converted into an ETF on the New York Stock Exchange. It is no coincidence that Morgan Stanley decided on the third quarter use that same vehicle to invest $300 million in Bitcoin.

However, even the first ETF ever approved in the US market to replicate the price of Bitcoin, the Proshares Bitcoin Strategy ETF (BITO), which was launched in the last month on the New York Stock Exchange and is based on Bitcoin price futures contracts, it was an immediate success, probably because it makes it possible to take a position on the Bitcoin price using the instruments already in use by investors.

Bitcoin protecting against inflation

Thanks to these tools, Bitcoin became an active part of the portfolio of many investors, including institutional ones. Its peculiarity is that it is used in place of gold as a hedge against inflation, while gold continues to be used as a hedge against inflation.

Thus, it is in fact an additional tool, especially for investors who have complex investment strategies, that is, who do not just try to buy assets at low prices and then sell them at higher prices.

Professional investors, and institutional investors in particular, are not afraid of risk, and risk management is often one of their best weapons. In this scenario, Bitcoin manages to carve a role for itself, even within the traditional financial markets that are dominated by large institutional investors.

For example, bond mutual funds are now dealing with very low real returns due to rising inflation, but even gold is failing to deliver high returns. Bitcoin could also become part of your portfolio as a risky investment that could offset the very low returns of off-risk investments.

In particular, equity funds seem to be the most exposed to Bitcoin, probably because they fear that a possible rise in interest rates, due to rising inflation, could still cause their portfolio prices to fall in the medium term.

a growing market

It is important to note that institutional exposure to bitcoin price it is generally minimal, if not negligible, compared to other asset classes, but it is growing and, in some rare cases, has even increased from 2% to 30%.

However, this is still an incipient market, in many respects immature, but offering volatility not found in other markets. And it is precisely this volatility that tends to attract investors, especially those looking for a little more risk so they don’t have to settle for very low returns.

The very fact that institutional investors’ interest in Bitcoin has risen again this year, and even after the fall in May, in the same year that many stock indices have essentially continued to rise, setting new historic highs, speaks volumes about the need for risk a little more.

With the Fed’s mega monetary stimulus campaign and the resulting runaway inflation, old yields are no longer sufficient to meet investor expectations. Given this scenario, it’s not surprising that many are turning their attention to Bitcoin.

Source: cryptonomist

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