A study released by global cryptocurrency exchange Binance indicates that only about 7% of Bitcoin in circulation is owned by institutional investors, suggesting that the much anticipated deluge of institutional investment in Bitcoin is yet to come.
The report, published by the exchange’s research arm, Binance Research, shows that there is far more space for growth in institutional investment than most people would assume, given that the amount of institutional money in the crypto market is barely a third of that invested in traditional stock markets. The report shares:
“[the] crypto market’s frequent periods of extreme correlation are inseparable from the market’s highly retail-driven participation… Data shows that whenever correlations between [Bitcoin and altcoins] reach a specific positive upper bound of [0.8 to 1.0], the trend of Bitcoin against USD tends to reverse, or at least halts the previous price action.”
Institutional investment is widely believed to be the much-needed catalyst for a strong and sustained growth in Bitcoin price, and, by extension the cryptocurrency market. This is one of the reasons that regulated derivatives such as the Bitcoin exchange-traded funds (ETF) applications awaiting US Securities and Exchange Commission (SEC) approval are keenly watched by investors.
At the moment, institutional investors would not be able to enter Bitcoin easily, since it can only be bought individually at exchanges at limited amounts. Huge orders expected by institutional money would also destabilize markets, since orderbooks at exchanges are thin in volume. Bitcoin’s recent surge by 10% in a day was an example of how big orders could cause sudden movements in price.
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