Autor: Anikait Panikker
Created in 2009 by pseudonymous person(s) Satoshi Nakamoto, the birth of Bitcoin has disrupted global financial markets. Though BTC was the first cryptocurrency, it’s the concept of digital assets that has changed the world. As technology has continued to progress at a rapid pace since 2009, there is one field that has yet to be completely digitized: financial services. With the onset of online banking, peer-to-peer transactions, and other developments, the circulation of fiat currency continues to occur in the real world. However, with digital assets gaining traction within the general public, institutions, and now governments, there is a real possibility that currency can play a major role in the digital world.
In accordance with the Block’s Legitimate Index, centralized crypto exchanges reported more than $14 trillion in trading volume just in 2021. In contrast, this statistic is an exponential increase of 689% compared to 2020 trading volumes. Retail investors make up a large portion of the customer base of the aforementioned exchanges, and with interest in crypto trading skyrocketing over the past year, many flocked to notable exchanges to be a part of the movement toward digitization. Achieving a 689% increase in trading volumes in a single year can be attributed to the individual interest of the general public to get a “piece of the pie.” Yet, it is important to note that these figures cannot be achieved without external forces like powerful individuals, celebrities, and corporations showing further interest in digital assets. For example, Elon Musk, the world’s richest person, has been playing a role influencing markets with his tweets. Dubbed as the “Musk effect,” the price of Bitcoin rose by $6,000 increasing its market capitalization by $111 billion solely due to Musk changing his twitter bio to “#bitcoin.” Considering a jump of 689% in trading value of crypto exchanges due to various actors beginning to believe in digital currencies, it is definitely a step in the right direction.
As the interest in cryptocurrency has been growing on behalf of retail investors, institutional investors and companies adopting digital assets can take the sector to new heights. In fact, Sam Bankman-Fried, FTX Exchange CEO, has stated that institutional adoption of cryptocurrencies could accelerate in 2022. Though it is uncertain how fast widespread institutional adoption can occur in the coming year, Bankman-Fried expresses that the status of this movement heavily relies on the regulatory front. Achieving regulatory clarity is a challenge that needs to be addressed, because without solidifying the legal infrastructure surrounding digital asset adoption, realizing the advantageous potential cryptocurrencies can have will be short-lived. Currently, every large investment bank, pension funds, and other public parties have been already keeping an eye on the sector, paving the way for future participation. Financial institutions like BlackRock, Mastercard, and Visa have already introduced crypto-related offerings. Furthermore, companies worldwide now hold over 1.6 million Bitcoin, and that number is expected to increase due to the asset’s recent slump. As of 2021, these companies hold an aggregate amount of over 1,660,473 BTC on their balance sheets, which accounts for more than 8% of the total Bitcoin supply. Michael Saylor’s business intelligence firm, MicroStrategy, leads the way with 124,391 Bitcoins and accounts for more than 75% of the company’s total market capitalization. In second place sits Tesla, which made a Bitcoin purchase worth $1.5 billion earlier in 2021. Subsequently after, the electric car maker started accepting cryptocurrency as a payment medium. As these are great examples of the advantages cryptocurrency can have on the world’s largest companies, the full extent of what Bitcoin and other cryptocurrencies can offer heavily relies on the speed at which regulation adapts to the fast growing interest in digital assets on behalf of institutional investors.
The world of digital assets has grown substantially, and at this rate, it is continuing to grow. In traditional media and online forums, it may be daunting to see the dominance of conversations revolving around institutional adoption of crypto. With large companies continuing to add assets like Bitcoin to their books, there is validity in questioning the significance of cryptocurrency to the average consumer. However, it is important to note that with an increased institutional adoption of digital assets, there is an increased hope in the rise in utility of different coins providing value to the crypto you attain from your preferred exchange.