Bitcoin has fallen from its all-time high established last month, but investors may be wary of investing at the present price. Despite sliding off its recent high, Bitcoin has gained 50% since January. Some fear they lost out on Bitcoin and that its eventual return doesn't justify its price.
However, a major catalyst might boost bitcoin prices over time. The impending Bitcoin halving may temporarily affect prices, but it will boost Bitcoin to sustained highs over time. Still time to join
Main reason to buy Bitcoin remains Investors have long been interested in Bitcoin and cryptocurrencies, but institutional acceptance is still low. Institutional investors hold most investable assets worldwide. As designed, Bitcoin will rise in price if institutional investors accept it and supply remains constrained.
The recent launch of 11 Bitcoin ETFs may encourage institutional investors to acquire Bitcoin. Investors can obtain exposure to Bitcoin and other cryptocurrency assets in several ways, but the new Bitcoin ETFs provide shareholders a direct ownership. Investors avoid the technical and security risks of directly owning Bitcoin.
Similar to gold ETFs. Investors can obtain exposure to gold by investing in gold miners, but an ETF gives shareholders a direct interest in physical gold without having to store it. Thus, half of institutional investors allocate gold to gold ETFs and 17% to real bullion.
If the pattern maintains, Bitcoin ETFs might treble institutional Bitcoin investment. To feel secure, investors want more regulation. Institutional investment engagement could rise as regulators tighten cryptocurrency regulations and investors get more comfortable holding it.
How big could adoption get? Institutional investors invested 4% of capital in gold and gold-related assets. This is a high bar for Bitcoin. Gold's value or perception dates back to ancient times. Analysts say Bitcoin and gold together are a better risk-adjusted investment than either alone. The typical ratio is 80% gold to 20% Bitcoin. Over time, 0.75% to 1% of global investable assets could enter Bitcoin.
That may not seem like much, but institutions hold $250 trillion in investable assets worldwide. Bitcoin demand increases by $2.5 trillion if 1% flows in. Bitcoin has a $1.3 trillion market valuation. Thus, even a tiny institutional investor adoption could boost the price. Cathie Wood's Ark Invest believes that institutional investors' 1% Bitcoin allocation would push each coin to $120,000. Allocating 4.8% would raise it to $550,000.
The institutional acceptance process is early. However, as new Bitcoin ETFs make it easier to invest in the main cryptocurrency, money should flood into the asset class rapidly. Still time to buy Bitcoin. The current dip may be a good chance for investors.
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