The year 2024 could well mark a historic turning point for Bitcoin. According to Matthew Hougan, chief investment officer at Bitwise, mass institutional adoption is now underway. However, recent record inflows into Bitcoin ETFs are only a prelude. They represent the beginnings of a much more colossal fundamental movement to come.
Institutional demand for Bitcoin booming
The crypto regulatory landscape has improved significantly in recent years. Regulators have gradually clarified the status of digital assets, providing a secure and conducive legal framework for institutional investments. The much-anticipated approval of spot Bitcoin ETFs in the United States has definitely smoothed the way.
Therefore, institutional demand for Bitcoin is literally exploding. Thanks to a more favorable environment, large fortunes and family offices initiated the movement in 2022. They perceive Bitcoin as a precious decentralized store of value, sheltered from galloping inflation. In 2023, the asset management giants have stepped into the breach. Pension funds, sovereign wealth funds and other behemoths have begun their due diligence with a view to integrating Bitcoin into their portfolios.
A record but symbolic influx
It is true that the 12 billion dollars garnered by Bitcoin ETFs since their launch in January constitutes a historic record. This is the largest fundraising ever for an ETF product. An impressive achievement which demonstrates the emerging appetite of investors for this emerging asset class. But this is only the beginning.
As Hougan points out, global wealth managers collectively control more than $100 trillion in assets. And they are still in the early stages of their allocation to cryptocurrencies. If these heavyweights were to allocate even just 1% of their portfolios to Bitcoin on average, that would would represent nearly 1,000 billion dollars of capital inflows. A staggering figure which would leave the recent 12 billion far behind.
A reasonable and reinforced allocation
This 1% allocation would not be illogical or inconsiderate according to Hougan. Studies have in fact demonstrated that a 2.5% exposure to Bitcoin would improve adjusted returns. This is at the risk of a traditional portfolio, regardless of the 3-year period observed in the history of crypto. An allocation of 1% would therefore seem entirely reasonable, and probably even too conservative given the potential of Bitcoin.
From now on, all the prerequisites seem to be in place for a real institutional surge to occur in 2024. On the one hand, the regulatory framework has considerably improved to facilitate this transition. On the other hand, institutional appetite is at its highest, stimulated by galloping inflation and the scarcity of traditional safe haven values. Finally, the Bitcoin ecosystem has become more professional, now offering the essential tools and services to operate securely.
A large-scale impact for Bitcoin
If this wave of institutional adoption fully materializes, the impacts could be colossal. A massive influx of institutional capital would put unprecedented upward pressure on the price of Bitcoin. Some analysts even mention the symbolic threshold of a million dollars per BTC within a few years. But beyond financial considerations, this institutionalization would signify the definitive integration of Bitcoin into the traditional global financial system.
In short, all the signals are converging to announce a potentially historic year 2024 for Bitcoin. The pioneering crypto could finally see its true takeoff thanks to the growing appetite of institutional investors. Facilitated by a favorable framework, this mass adoption would establish Bitcoin as an essential store of value for years to come. However, recent record inflows into Bitcoin ETFs still represent just the beginning. Barely 1% of the true future potential if the institutional allocation reaches even 1%.
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