The increasing demand for Bitcoin from institutional investors has become a central topic in the cryptocurrency market. According to Paul Brody, the Global Blockchain Leader at Ernst & Young (EY), there is significant interest from various institutions awaiting the approval of the Bitcoin ETF, which could trigger a massive buying spree.
The need for a Bitcoin ETF is evident, as, while “family offices,” known for their flexibility, are already investing in cryptocurrencies, other institutional funds face regulatory restrictions that prevent them from entering the market directly.
The approval of the ETF would provide these institutions with a regulated and authority-approved investment route, opening the door to a significant amount of capital that currently remains on the sidelines of the crypto market.
Beware of Geopolitics and Retail Money
However, it is essential to highlight that there are risks associated with the entry of retail money into the market, as external events could potentially trigger a liquidation and disrupt its dynamics.
It’s important to note that, unlike traditional assets such as gold, whose supply can increase when its price rises, the issuance rate of Bitcoin is fixed and will eventually come to an end. This could make its price less elastic compared to other assets used as hedges against inflation or with limited supplies.
On the other hand, the backdrop of geopolitical uncertainty also plays a significant role in the volatility of cryptocurrencies, especially when they are used as a hedge against political instability. They can be affected by unpredictable political events, introducing an element of uncertainty.
Brody emphasizes a clear distinction between Bitcoin and Ethereum in terms of usage. Bitcoin is primarily considered an asset, not a payment tool, while Ethereum serves as a computing platform for business transactions, decentralized finance services, and stablecoin transactions.
The approval of a Bitcoin ETF is seen as the likely catalyst that will trigger a wave of institutional investment. According to several analysts, its approval is imminent and expected to occur before the end of the year or, at the latest, in early 2024.