Institutional demand for bitcoin appears to be experiencing unprecedented growth, despite slowing inflows into digital asset investment products. Bitcoin could attract more investors. At issue: its unique regulatory position and its perception of protection against traditional banking crises.
The context: banking turmoil and digital asset inflows
The last few weeks have been marked by a major banking crisis. This is the first since 2008. The collapses of Silicon Valley Bank and Signature and the restructuring of Credit Suisse under the aegis of UBS are the main causes.
This situation coincided with a significant rise in the price of bitcoin, which jumped more than 40% between March 10 and March 22.
At the same time, digital asset investment products recorded their largest weekly inflow since July 2022. The amount of this inflow stands at $160 million.
However, according to the recent CoinShares report, the pace of entries has slowed considerably. The following week, only $2.5 million was recorded.
Despite this decline, on-chain data from CryptoQuant shows that the amount of bitcoin held by digital asset managers has increased. This increase has occurred in recent weeks.
Why Bitcoin Could Dominate Institutional Demand
Bitcoin has several advantages that could make it particularly attractive to institutional investors.
First, as the world’s first cryptocurrency and considered by many to be the most secure, Bitcoin is often perceived as the best bet against a traditional banking crisis.
Second, unlike many other cryptocurrencies, bitcoin is largely in good regulatory standing. The United States Securities and Exchange Commission (SEC) considers bitcoin as a digital commodity. Therefore, it escapes their regulatory oversight in a sense.
Bitcoin appears to be poised to dominate institutional demand. Mainly because of its privileged regulatory position. Additionally, bitcoin enjoys a reputation for safe haven in the event of a banking crisis.
Investors could thus favor bitcoin rather than other cryptocurrencies. This trend could have significant implications for the evolution of the market and how institutional investors approach it in the future. In this sense, the future of bitcoin after this banking crisis looks promising.
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