Crypto is a hedge against inflation and economic downturns. As central banks around the world continue to print money, you should be concerned about the long-term value of fiat currencies. Additionally, blockchain technology has proven to be a boon in terms of security and efficiency, which is why many financial institutions are exploring ways to incorporate it into their operations.
Overall, as more institutions begin to invest in crypto assets and blockchain technology, this will likely lead to increased adoption and mainstream acceptance of cryptocurrencies.
Institutional interest in Bitcoin
Institutional interest in Bitcoin has grown significantly in recent years. Bitcoin, as the first and most well-known cryptocurrency, has attracted attention from various institutional players, including banks, hedge funds, asset management firms, and even some government entities.
Adoption by Financial institutions
Several traditional financial institutions have recognized the potential of Bitcoin and other cryptocurrencies. Some prominent examples include JPMorgan Chase, Goldman Sachs, and Fidelity Investments, which have started offering services or investing in the crypto space. These institutions’ involvement has helped legitimize Bitcoin and increase its mainstream acceptance.
Bitcoin investment funds
Institutional investors have launched dedicated funds specifically for investing in cryptocurrencies, including Bitcoin. These funds provide an opportunity for institutional investors to gain exposure to Bitcoin’s potential without directly holding the cryptocurrency themselves. This trend has opened up new avenues for institutional capital to flow into the Bitcoin market.
Bitcoin futures and derivatives
The introduction of Bitcoin futures contracts on regulated exchanges, such as the Chicago Mercantile Exchange (CME), has allowed institutional investors to gain exposure to Bitcoin without actually owning the underlying asset. Additionally, the development of Bitcoin options and other derivatives has provided institutions with more sophisticated investment instruments to manage risk and enhance trading strategies.
Institutional custody Solutions
Custody services tailored for institutional investors have emerged to address their specific needs in securely storing and managing Bitcoin holdings. These services offer robust security measures and institutional-grade infrastructure to mitigate the risks associated with holding cryptocurrencies. Established financial institutions and specialized crypto custodians now provide such services, attracting institutional investors looking for secure storage solutions.
Regulatory developments
Increased regulatory clarity and oversight in some jurisdictions have contributed to institutional interest in Bitcoin. Regulatory frameworks provide a level of certainty and investor protection that institutions often seek before committing significant capital. As regulators establish guidelines and regulations around cryptocurrencies, institutional investors can navigate the market with more confidence.
Inflation hedge and diversification
Bitcoin’s decentralized nature and limited supply make it an attractive asset for institutions seeking protection against inflation and diversification within their portfolios. As traditional financial markets face uncertainties, institutional investors view Bitcoin as a potential store of value and a hedge against economic instability.
It’s important to note that institutional interest in Bitcoin can be influenced by market conditions, regulatory changes, and investor sentiment. While institutional involvement has grown, it does not imply unanimous support or constant investment. The level of institutional interest in Bitcoin may vary over time as market dynamics evolve.
Blockchain technology paves the way for institutional transformation
Blockchain’s decentralized and secure nature eliminates the need for intermediaries and provides a transparent ledger for transactions. As a result, big corporations and governments have explored blockchain technology’s potential in transforming the way they operate. One of the main reasons for this is its potential to streamline financial processes and reduce costs.
Blockchain can be used for various applications such as cross-border payments, trade finance, and supply chain management, making it attractive to institutions looking to improve efficiency. Moreover, blockchain technology’s robust security features make it an appealing option for institutions seeking to protect their assets from cyber threats.
With high-profile hacks on traditional financial institutions becoming more frequent, blockchain’s immutability and encryption provide an added layer of protection. Blockchain technology paves the way for institutional interest in crypto by offering increased efficiency and security.
Digital assets gain credibility among traditional investors
An increasing number of well-established financial institutions–most recently, BlackRock and Fidelity–are dipping their toes into the crypto market. These institutions include major banks, asset managers, and hedge funds that have started offering cryptocurrency-related products and services to their clients. Additionally, regulatory frameworks that provide clarity on how digital assets should be treated by traditional financial systems–especially MiCA out of Europe–have helped boost investor confidence in cryptocurrencies.
COVID-19 lockdowns also played a role in accelerating institutional adoption as investors seek alternative investment opportunities amid economic uncertainties. As a result, more institutional players are exploring ways to invest in digital assets such as Bitcoin and Ethereum to diversify their portfolios and potentially benefit from the potential upside returns offered by these new asset classes.
Increasing institutional interest signals a promising future for crypto
The increasing institutional interest in cryptocurrencies is a clear indication that the crypto market is heading towards a promising future. Institutional investors, such as banks, hedge funds, and pension funds, have traditionally been skeptical of digital assets due to their volatility and lack of regulation.
The recent ETF applications by BlackRock and Fidelity, as well as the ensuing surge in Bitcoin’s value, has caught Wall Street’s attention. With Bitcoin halving coming up in 2024, it appears to be a perfect storm for institutional investors FOMO into crypto, seeking high returns and diversification in their investment portfolios.
Kadan Stadelmann
Kadan Stadelmann is a blockchain developer, operations security expert and Komodo Platform’s chief technology officer. His experience ranges from working in operations security in the government sector and launching technology startups to application development and cryptography. Kadan started his journey into blockchain technology in 2011 and joined the Komodo team in 2016.
Gemini’s Cameron Winklevoss believes that the race by traditional finance institutions to file for BTC ETF marks a great turnaround for the industry.
He tweeted on June 21 that the window to front-run institutional demand is closing quickly.
Cameron Winklevoss, a Gemini co-founder, believes that the great accumulation for BTC is here with different TradFi institutions racing to buy in. His comments come when BlackRock, the world’s largest investment manager, filed for an ETF, prompting its competitors to follow suit.
ETF filing race by TradFi institutions convinces Cameron Winklevoss that BTC will rally
Analysts now believe that more than ever, more institutional demand for prominent coins like Bitcoin is coming to the crypto space. It follows recent news that BlackRock had filed for a spot in Bitcoin ETF.
As a result, its competitors like Valkyrie, Wisdom Tree, and Fidelity have filed for similar assets with the US SEC. This has driven the demand behind Bitcoin momentarily, with it reclaiming the 50% market dominance. The coin has surged 19% to $30,240 since the BlackRock news came to light on June 15.
Cameron Winklevoss, a Gemini co-founder and a prominent loud voice in the crypto industry, has commented on this matter, saying that “The Great Accumulation” of Bitcoin has begun. He suggested that buying Bitcoin before the ETFs hit the markets would be a great idea akin to a pre-initial public offering purchase of Bitcoin.
The Great Accumulation of bitcoin has begun. Anyone watching the flurry of ETF filings understands the window to purchase pre-IPO bitcoin before ETFs go live and open the floodgates is closing fast. If bitcoin was the most obvious and best investment of the previous decade, this…
He added that if Bitcoin was the best-performing asset of the past decade, it would most likely be the best-performing asset for the coming decade. Others have backed his claims, including MicroStrategy Executive Chairman Michael Saylor, who suggests that retail investors may soon be pushed aside by increasing institutional demand.
However, some analysts believe that more buying pressure will be there than selling pressure, as most investors wouldn’t want to sell their coins to Wall Street. Bitcoin investor Anthony Pompliano took to Twitter to address the matter, saying he expects a tug-of-war between retail investors and Wall Street:
“We have institutions and individuals scrambling to try to get their share of the 21 million Bitcoin that will ever be in existence. The retail investor for 15 years now has a head start and has accumulated all the Bitcoin that’s been mined and put into circulation, but 68% of that hasn’t moved in a year.”
BlackRock shows up and bitcoin is up 20% for the week.
People forget that bitcoin went from $0 to nearly $1 trillion market cap with almost no institutional participation.
If retail investors were good for $1T, what do you think happens when the deep pockets come play?
He added that he expects Bitcoin to be highly illiquid once Wall Street hits the market as investors keep their coins away from institutional investors. Keep watching Fintech Express for updates on crypto adoption and other Fintech-related developments.
Stablecoin company, Tether, said on May 20, 2023, that it would commit its resources to mining Bitcoin in Uruguay using renewable energy.
As Bitcoin halvings increase, Bitcoin’s mining hash rate is rising, necessitating more innovative ways of accessing electrical power as concerns are rising due to its high consumption levels.
Stablecoin Company Tether is shifting toward diversifying its treasury management strategy by investing some of its net profit in Bitcoin.
Tether to do more than minting USDT; Bitcoin in mind
Tether, the world’s largest stablecoin company, has revealed that it seeks to diversify its treasury investment strategy by investing part of its profits in Bitcoin. The company is now moving to mine Bitcoin in Uruguay using renewable energy.
The company revealed this plan on May 30, 2023, marking its first foray into the green energy sector. It added that it is also searching for experts in the new venture to support its expansion in the green energy space. Bitcoin’s rising hashing figures require even more energy to secure the network and mint new coins, which necessitates the innovation of more solutions like green energy.
“By harnessing the power of Bitcoin and Uruguay’s renewable energy capabilities, Tether is leading the way in sustainable and responsible Bitcoin mining,” said Paolo Ardoino, CTO of Tether.
“Our unwavering commitment to renewable energy ensures that every Bitcoin we mine leaves a minimal ecological footprint while upholding the security and integrity of the Bitcoin network.”
In early May 2023, Tether revealed that it plans to invest some of its profits in Bitcoin. The company committed to investing up to 15% of its net profit in Bitcoin, mimicking strategies from other international companies like Elon Musk’s Tesla and Michael Saylor’s Microstrategy.
Tether is now eyeing to establish its Bitcoin mining plants in Uruguay, one of the prominent leaders in renewable energy production, sourcing over 98% of its electricity output from green energy sources. This development creates a positive image for the company and Bitcoin, as influential people in the crypto industry have asked crypto miners to consider energy sources with lower carbon prints.
Keep watching Fintech Express for updates on crypto and other Fintech-related stories.
Michael Saylor, who founded and heads Microstrategy, one of the largest institutional holders of Bitcoin, has been a vocal voice in the crypto space. At the Bitcoin Conference 2023, he said that using public blockchains like Bitcoin could solve most problems facing the cybersecurity space.
Michael Saylor says most emerging problems could be solved via Bitcoin
At the Bitcoin Conference 2023, Michael Saylor touched on how cybersecurity is becoming a threat today. He reflected on fake accounts constantly being purged off social media platforms like Twitter, saying that such fake accounts could be weaponized to drive divisive political agendas.
However, he explained how cryptographic security solutions like Bitcoin’s Ordinals and inscriptions could be used to do away with such misuse of technology. Michael Saylor said that digital identities could be inscribed on base layers of public blockchains like Bitcoin then the data is also copied to a universal database that is immutable and thus records any social media presence that a given individual builds.
He proposed that the use of such innovation could effectively control the rise of fake social media presences, giving an example of how an individual who generates 1 million fake bots and is caught and blocked loses a significant amount of money, thus serving as an example to others.
It’s not the first time that Saylor has praised the innovation behind Bitcoin. However, the effectiveness of such a technology in cybersecurity on a large scale remains untested as crypto adoption rates still need to be higher. However, some similar applications in things like Domain Names like Unstoppable Domains and Ethereum Name Service have already been seen though they still need to be more effective than Saylor explained.
Bitcoin was created in the aftermath of the 2008 financial crisis and was meant to be a digital monetary system that is independent of centralized control. However, as the mining rewards are getting squeezed due to multiple halvings and most of the coins being mined new BTC ‘products’ like Ordinals NFTs and BRC-20. But what are the implications of the new ‘innovation’ on the network
Tick tock tick!
It’s May 7, Binance, the largest cryptocurrency exchange network, goes to Twitter to announce a halt of BTC withdrawals citing network congestion. Binance reinstates the withdrawals about 1.5 hours later.
A few hours later, Binance halts BTC withdrawals again, citing the same reason as before, network congestion. This is the first time that the largest crypto exchange halted withdrawals of the largest crypto asset. But why is this ‘impossible occurrence’ happening now?
Blameshifting began, with some even selling some FUD about the Binance exchange. However, the biggest share of this blame was against new technologies arising on Bitcoin. What new technologies?
The Dawn of Bitcoin Ordinals
Ordinals NFTs are a unique class of non-fungible tokens based on the BTC blockchain. Since its launch in early 2023, Ordinals NFTs have received massive hype within social networks.
Ordinals leverage a protocol that numbers Satoshis with unique serial numbers helping trace them amid transactions. The creator of Ordinals discovered that it’s possible to inscribe some data, including images, videos, and others, on Satoshis.
Simply put, Ordinals are NFTs based on the Bitcoin network. Ordinals reside fully on the blockchain and do not require a sidechain or separate token.
BRC-20: A New Token Standard
When you see BRC-20, what rings in your mind? You probably recall a popular Ethereum standard, ERC-20. But no, it’s BRC-20. What is BRC-20?
BRC-20 includes DeFi-like tokens on the Bitcoin network. Essentially, BRC-20 stands for ‘Bitcoin Request for Comment’ and introduces a new class of tokens inscribed on Bitcoin’s Satoshis.
Domo, an anon on-chain data specialist, first pioneered this system. The user claimed that the general idea of BRC-20 was derived from a Twitter conversation.
Satoshi Dream: Creating the Future of Finance
It’s impossible to 100% visualize what Satoshi thought when creating BTC. However, the whitepaper paints a slightly blur picture of BTC as the future of finance.
Ils impriment les €uros comme si c'étaient des billets de Monopoly 💶
Imprimons TOUS une version FR du Whitepaper #Bitcoin et remplissons TOUTES les boîtes à livre de toutes les villes de France 📃🇫🇷 pic.twitter.com/nQ2x3073ag
— Kaeru 🐸 Meme Crypto (@MemeCryptoFR) May 10, 2023
The practical applications of Bitcoin in the past indicate that Satoshi wanted a decentralized, peer-to-peer, and transparent yet anonymous payment system. At the heart of Bitcoin’s creation was empowering true value exchanges.
Satoshi invented the Bitcoin network with the ultimate aim goal of ensuring there is complete financial freedom. With this system, the rich and poor would have equal chances of storing funds and making payments.
However, Satoshi’s dream also included providing an efficient operating network. So, the real question is, how will new technologies like BRC-20 and Ordinals NFTs affect Satoshi’s original dream?
New sub-Technologies Killing Satoshis Dream?
The new technologies have created a risky scenario on the Bitcoin network leading some to speculate that doom is facing BTC. The risky scenarios are as below;
Overcrowding Issues Face the Future of Money
Satoshi’s money for the future has been suffering slow settlements. Bitcoin’s decentralized nature indicates that Satoshi wanted users to enjoy unfathomable speed. However, owing to possibly a slight miscalculation, BTC could only deal with seven transactions every second. The lightning network was later introduced to improvise BTC’s transaction processing mechanism.
The emergence of new technologies has been a source of congestion in Bitcoin. How? Owing to the rise of these technologies, there has been a massive increase in transactional activities in Bitcoin. The surge has caused congestion within the network.
As mentioned earlier, between May 7 and 8, 2023, Binance halted BTC withdrawals twice. This is because of congestion.
We've temporarily closed $BTC withdrawals as the #Bitcoin network is experiencing a congestion issue.
Our team is currently working on a fix until the network is stabilized and will reopen $BTC withdrawals as soon as possible.
Data from Mempool indicated that the number of unconfirmed transactions stood at over 454 thousand. This number ranged between 400k and 500k pending transactions at a time.
Mempool’s data showing Bitcoin’s unconfirmed transactions
The congestion in Bitcoin is mainly attributed to the new technologies, i.e., BRC-20 and Ordinals. Bitcoin receives thousands of transactions every minute based on Mempool data. Bitcoin maximalists have similar sentiments about the current source of BTC congestion.
Bitcoin Fees Jump Higher Than The Daily Wage of Over 4 Billion People
The new techs on Bitcoin have caused a fee surge on the network. Of course, Bitcoin fees have been troubling for years, especially in times of bull markets. The highest Bitcoin fee was reported in 2021 at over $60 when the coin’s value was over $60k.
It’s surprising that the recent fee upsurges are occurring amid a bear market— or is it really surprising? The recent flooding of transactions created a fee problem. Reports indicate that Bitcoin’s transaction fees surged to a 2-year high.
There have been reports of fee issues in countries like El Salvador, which use BTC as a legal tender. A crypto enthusiast posted a tweet noting how the Bitcoin fees affect the average user.
I’m in El Salvador 🇸🇻 right now. Just witnessed a cash withdrawal via #btc
This individual now had to pay $20 in fees for getting $100 out in a country where the avg. salary is $300-350
I want you to think about this when enabling gambling on fkn jpegs or meme coins.
In this tweet, Marce Romero mentioned that she witnessed a transaction where a user paid $20 in fee for a transaction of $100 BTC. The average monthly salary in El Salvador is $350. If someone has to pay $20 per $100 transaction, an average El Salvadoran uses 20% of their salary as a fee.
Another article on Ethereum fees indicates that the average daily wage for about 4.2 billion people globally is $21. If someone has to pay $20 per transaction on Bitcoin, they spend all their wages on transaction fees. Well, can anyone do that? Of course, No! So, where does this leave mainstream crypto adoption? It’s ultimately slowed.
Are Miners Extraordinarily Benefiting at the Users’ Expense?
As the fees surge, a small group of Bitcoin stakeholders becomes the biggest beneficiary. Who? Miners
Mining companies have been major beneficiaries of network congestion. The stocks of Bitcoin mining companies effectively surged in the days preceding and following the BTC fee surges. Hopes of higher fees drove all this. The mere fact that miners are now benefiting extremely at the expense of average users exposes the crisis in Bitcoin.
Note: The Bitcoin dream was to foster fairness and equality, not enrich some at the expense of others.
Harper from Luxor Technologies, a mining company, noted that the BRC-20 standard doubled their miner revenue. He also noted that the fee would eventually revert to their original averages. Based on Harper, investors should expect to see similar occurrences in the future when new mints and inscriptions use Bitcoin.
Another mining company spokesperson Nazar Kan of TeraWulf mentioned that BTC fees would slow down in the long term.
Executive Chairman of MicroStrategy, @saylor, on the impact of Ordinals on Bitcoin mining and the power of inscriptions.
“What happened with Ordinals and NFTs is we crossed this chasm from what was a bearish scenario to a bullish scenario. If I was a miner I would be ecstatic.” pic.twitter.com/UDIGN5C08I
The CEO of MicroStrategy, Michael Saylor, even publicly said, “If I was a miner I would be ecstatic.”
Another Bitcoin maximalist, Clark Moodie, highlighted that “high fees are good for Bitcoin.” However, many respondents claimed that high fees only benefit Bitcoin miners.
The positive: Developments create a Decentralized Economy
Despite having a dark side, the recent developments on Bitcoin have a lighter side too. The Bitcoin network can now be home to a new decentralized economy.
Now, Bitcoin is earning more use cases in NFT and DeFi. DeFi and NFT are what mainly constitute a decentralized economy in Ethereum. As we see the rise of DeFi-like tokens in Bitcoin, this is great for the future of this network.
Den Held, a Bitcoin enthusiast, recently tweeted that “Bitcoin DeFi is just getting started,” highlighting examples like Ordinals, DLCs and Lightning.
Bitcoin DeFi is just getting started:
– Ordinals (Bitcoin NFTs/other coins) – Lightning/Taro (other coins) – DLCs (Options on Bitcoin) – And many many more🔥
The growth of NFTs and DeFi tokens will dawn a world of opportunities within the Bitcoin network. Creators in the artistry industry can use Bitcoin’s technology and reputation to build trustworthy NFTs.
Another fascinating aspect of the new technologies in Bitcoin is the possibility of the emergence of layer two solutions. Several Bitcoin network enthusiasts lightly highlighted this.
Muneeb.btc, a Bitcoin network enthusiast, highlighted that recent events that triggered high fees could drive the creation of layer two solutions for the network.
High gas fees on Ethereum started an entire industry around L2s, rollups, and other scaling R&D. High gas fees on Bitcoin can do the same for improving Bitcoin infrastructure and L2s.
When Ethereum faced such a crisis, several layer two solutions like Polygon, Arbitrum, and more were created. As the largest crypto network, Bitcoin’s developments will likely attract attention faster, creating layer two options.
Another Bitcoin enthusiast, the Wolf of all Streets, had similar sentiments about recent developments within Bitcoin. The user highlighted the vitality of L2s, especially when L1 blockchain fees become unbearable.
There are so many people advocating for an increase of the #Bitcoin block size limit to fit Ordinals inscription data and lower transaction fees.
These people probably just haven't been here long enough to know that an increase in block size was already attempted in 2017. The… pic.twitter.com/X7I1MMmouQ
Calls to increase Bitcoins blocksize have also been quite prevalent within the blockchain ecosystem owing to recent problems. Some community members believe boosting the blocksize will help cater to the ordinals’ inscription data. However, the technological adjustment has already been tested in BTC, leading to the rise of Bitcoin Cash.
Finally
This guide has looked into the new technologies on the Bitcoin blockchain, including BRC-20 and Ordinals NFTs. It is clear that while the tech has some negative impacts, it’s also great for ascertaining the future of BTC by adding new use cases and more developments.
