Institutional investors' interest in Bitcoin is increasingly rising

The price of Bitcoin has retreated from its historical peak in 2017, but institutional investors' enthusiasm for investing in it continues to rise. Currently, the price of Bitcoin is around 9600 USD, down 52% from its historical high of 20093 USD. However, the investment scale of institutional investors in Bitcoin has shown significant growth.

The main factors that drove institutional funds into the Bitcoin market in 2020 include: the positive attitude of well-known investors and institutions, the maturity of Bitcoin, and the continuous strengthening of the fundamentals.

The asset management scale of a certain cryptocurrency trust fund ( AUM ) is often used as an indicator of institutional investors' participation in Bitcoin investment. In the United States, due to the lack of Exchange-Traded Funds ( ETF ), institutional investors primarily engage in cryptocurrency investments through exchange custody and trust funds.

The trust fund allows investors to indirectly invest in Bitcoin, reducing the risks for large investors holding Bitcoin directly. When the price of Bitcoin reached an all-time high in 2017, the fund's AUM peaked at $2.966 billion. In contrast, as of June 23, 2020, its AUM had exceeded $3.5 billion, nearly 20% higher than its historical peak.

The proportion of investment by institutional investors in the fund has also significantly increased. In the first half of 2018, 56% of the investments came from institutional investors. By the first quarter of 2020, this proportion reached as high as 88%. This indicates that institutional investors are increasingly interested in cryptocurrency-related investment tools.

Some rating agencies believe that the "gate" for large institutions to enter the Bitcoin market has been opened. In the coming months, a shift in the attitudes of major financial institutions may further stimulate institutional investment activity.

Recently, some large financial institutions that have previously been critical of Bitcoin have begun to change their stance. An analyst from a large investment bank stated that Bitcoin has demonstrated resilience and has started to take a more positive attitude towards it. The investment bank has also opened bank accounts for some cryptocurrency exchanges, increasing its support for the crypto industry.

Some well-known billionaire investors have begun to recognize Bitcoin's potential as a hedge against fiat currency inflation risks. Some investors have disclosed that they allocated 1% of their net worth to Bitcoin.

The maturity of Bitcoin is an important factor that has sparked increased interest from institutional investors. Its viability is seen as an attractive feature. An investor stated that for every day Bitcoin survives, his trust in it grows.

As a decentralized blockchain network, the Bitcoin network's computing power ( hash rate ) continues to rise, indicating its ongoing maturity and expansion. Data shows that from June 2019 to June 2020, the Bitcoin network's hash rate increased from 57 million TH/s to 105 million TH/s.

Despite experiencing the third halving, the Bitcoin network's hash rate has remained robustly resilient. This resilience, coupled with the increased awareness of Bitcoin among major financial institutions, as well as the rapid influx of institutional funds, has led to a Bitcoin market in 2020 that is distinct from previous years.

The decline in the reserves of cryptocurrency exchanges also supports the trend of institutional demand for Bitcoin rising. This indicates that retail investors' trading activity is decreasing. If this trend continues in 2020, it may lead to an increase in the market share of exchanges focused on institutions, thereby changing the dynamics of the cryptocurrency market.

However, not all financial institutions are optimistic about the long-term prospects of Bitcoin. Some institutions believe that hedge funds trade cryptocurrencies solely because of their high volatility, and this does not constitute a viable investment basis.

Overall, institutions and high-net-worth investors have differing views on the future development of Bitcoin. Some anticipate that Bitcoin will become a mature store of value and a reliable safe-haven asset, while others believe its growth potential is limited. In any case, as long as there are no fundamental changes in Bitcoin's fundamentals, long-term holding may still be the strategy to maximize investment returns.