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Crypto market reaching $2T could encourage more institutional participation

The total crypto market capitalization just reached $1 trillion early this month when Bitcoin's price soared past $37,000.

Image by Gerd Altmann from Pixabay

Fri, 22 Jan 2021, 05:42 am UTC

Institutions began to enter the crypto market in 2020 as traditional asset managers and banks began to seriously consider Bitcoin and other cryptocurrencies as a hedge against inflation. In fact, the BTC rally which started late last year is attributed in part to the increasing demand from institutional investors.

A recent report from advisory firm Aite Group pointed out that there are a still few factors that could make the crypto market even more attractive for institutional investors. Commissioned by eToro, the report said that more institutional investors would enter the space once the total capitalization of the cryptocurrency market reaches $2 trillion, according to Cointelegraph.

“Only by widening the playing field and facilitating more participation will crypto reach and maintain a market cap of $2 trillion and beyond,” eToro head of business development Tomer Niv said. The report was based on interviews with 25 institutional investors with exposure to digital assets.

The report acknowledged that the participation of institutional investors greatly the crypto market’s rally that started in 2020. For instance, MicroStrategy made headlines last year when it amassed 40,824 BTC in its treasury reserve as of early December. Similarly, Grayscale Investments has been constantly increasing its crypto assets under management, which helped push BTC to its new all-time high above $40,000 earlier this month.

“2020 was the year when many institutional investors such as banks and traditional asset managers began to either invest in crypto or seriously consider doing so, with several touting the asset class — particularly Bitcoin — as an inflation hedge,” Niv added.

Aside from the expansion of the crypto market to $2 trillion, the report also mentioned that a development market infrastructure and lesser regulatory uncertainty could entice more institutional investors to enter the market. “It’s encouraging to see that the next phase of the crypto industry’s evolution is underway with more participation from institutions…” the report added. “More needs to be done from a market infrastructure point of view to make this group of investors feel comfortable joining the crypto ecosystem.”

However, getting to a $2 trillion crypto market might take some time. The market just reached $1 trillion for the first time in January 7, 2021, when BTC soared past $37,000, according to Independent.

Bitcoin’s price retracted on profit-taking and is trading above $31,000 at the time of writing based on data from CoinMarketCap. The total market capitalization of the entire crypto market suffered as well and is now valued at $897 billion.

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