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Why Aren’t Institutions Taking Bitcoin by the Horns?

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Bitcoin has come a long way since the 2017 pump and dump that either made people millionaires or broke and infuriated with Bitcoin. That bubble was a harsh lesson for some who got in at the wrong time, but for most investors who were on the outskirts, it was a poignant reminder of the dangers of volatility. 

However, today’s market is far more normalized, legitimized, and even less volatile to an extent. There is still the impressive gains but without the same gut-wrenching losses. 2019 has seen the price of Bitcoin nearly triple, and that growth has been predominantly sustainable. 

The question that then needs to be asked is why are traditional investors simply not taking advantage of the gains, and the easy entry to market? Bitcoin, as an investors tool, is one of the easiest to use and be a part of. Anyone with a lot of money, and a smartphone can be an investor. 

Yet, large scale institutional investing is still apparently waiting for things like Bitcoin ETFs, which continue to elude the market. There are Bitcoin futures offerings, which are creating their own tidy market, but it begs the question as to why more traditional investors are being kept away.

It cannot be about the price and the cost of investing, as it has been noted that shares of the Grayscale Bitcoin Trust (GBTC), which allows investors to bet on Bitcoin (BTC) without holding the asset itself, are running at a premium.

For example, the market price for GBTC shares was $12.85. With each share tracking the value of 0.00097753 BTC, the underlying value of each share is actually $10.48, at current prices. Clearly it would be cheaper to buy that amount of Bitcoin and invest that way simply.

However, investors are happy to pay such a premium for the simple fact that they do not have to hold the volatile, and often misunderstood, asset. But is there still this need to be fearful of Bitcoin? Bitcoin futures are another instance where the investor does not hold the asset, and this product is reported to be a firm favorite of the more adventurous investor. 

Bitcoin is undoubtedly a much more mature market, but there are still concerns that need to be helped. Primarily the asset is an attractive one to hackers and scammers, and there have been many instances of people losing their money because of the bad practices relating from exchanges and other third-party services. 

Thus, it could be that the reason institutional money is being kept away from Bitcoin is because of the Wild West persona of the industry. So, instead of pushing for other traditional institutional investment products, perhaps the effort should be going into securing exchanges and opening up a safe and secure trading space for everyone and anyone. 

Darryn Pollock

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