Despite Crypto Winter and the icy cynicism of Crypto-Land’s worst critics, all indications are that institutional investors have not been discouraged enough by opposing rhetoric to abandon the space altogether. Quite the contrary is true, as several key indications of participation continue to expand, as if focused on a convergence sometime in the near-term future. Yes, there remain many concerns about crypto’s shortcomings that trouble institutional investors, but inroads are being made to address each of these issues.
Cryptocurrencies and everything they stand for have many loud, outspoken critics, but several of them, like Jamie Dimon, the Chairman and CEO of JPMorgan Chase and famous for his ”Bitcoin is a scam” and other defamatory remarks, has shifted gears in midstream, once his bank announced its major endeavor, “JPM Coin”, an internal project designed to create efficiencies and cost savings via blockchain technology. Sadly, however, many other critics remain quite venal in their comments, but appear to be earning a failing grade, if their intent was to impede institutional demand for crypto.
What are these crypto antagonists saying? Here are a few snippets:
- Paul Donovan, UBS Chief Economist: “Anybody with a higher school education in economics would be a Bitcoin skeptic from the [get-go].” At the end of last November, he made the case on CNBC that it was time to bury bitcoin.
- Nouriel “Dr. Doom” Roubini, economist and Harvard alumnus: At a Congressional Hearing, he warned senators that cryptos were the “mother or father of all scams and bubbles.” He is also famous for saying that, “99 percent of all cryptocurrencies are worth zero.”
- Mark Dow, trader and policy economist for the U.S. Treasury and the IMF: He was famous for shorting Bitcoin at its peak and profiting by it handsomely. He told Bloomberg: “I’m done. I don’t want to try to ride this thing to zero. I don’t want to try to squeeze more from this lemon.”
- David Gerard, social media crypto critic and author of the blockchain hater’s bible, “Attack of the Fifty Foot Blockchain”: Gerard derides all things crypto in daily rants on social media. His most notable public quote: “It’s an apocalyptic death cult. Bitcoin maximalists are completely inward-focused. They aren’t talking to the public anymore, just each other. They’re trying to convince each other not to jump ship.”
There are others, as well, but the same could be said for crypto zealots on the other end of the spectrum. The fact is, however, that, as these vocal mouthpieces curry favor with sardonic diatribes in the social ether, institutional investors have been silently maneuvering in the background, preparing for what they expect to come next – very positive returns on crypto positions, far greater than with their equity counterparts.
Here are a few facts on the flipside of the coin (and yes, a pun was intended):
- Recent research by the analysts at Binance claims that as much as 7% of the total value of crypto positions are held by institutions. By contrast, equity participation by institutions is a “10X” multiple or more, suggesting that, while a substantial beachhead has been secured, one could easily argue that a large amount of capital is sitting on the sidelines, waiting to jump on board the crypto train when the time is right.
- Institutional investments in initial offerings of crypto development projects climbed to $2.4 billion for 117 deals in 2018. After only four months into 2019, there has been $850 million for 13 deals. The 80% collapse in valuations that occurred during Crypto Winter did not deter these investors.
- According to International Data Corp: “Total corporate and government spending on blockchain should hit $2.9 billion in 2019, an increase of 89% over the previous year, and reach $12.4 billion by 2022. When PwC surveyed 600 execs last year, 84% said their companies are involved with blockchain.”
- Forbes recently published its new “Top 50” list, entitled “Blockchain’s Billion Dollar Babies”. The report revealed that: “Some of the world’s largest corporations, including an array of prominent technology firms, have forayed into this space, quietly throwing human capital and money at this innovation to find something that sticks.”
- “Matt Hougan, the head of research at Bitcoin exchange-traded fund (ETF) hopeful Bitwise, revealed that his firm’s trade volume provider revealed that the volume of the CME’s BTC futures passed that of the largest legitimate spot exchange, Binance… this does show that institutions do play a bigger role in cryptocurrency than some think.”
- As previously reported: News headlines have been rife with stories about Fidelity Investments, Bakkt, ErisX, the Nasdaq, IBM, Facebook, JPGMorgan, Samsung, and others, as they pave the way for greater institutional involvement and public awareness of Bitcoin and cryptos.
Despite the negative flow of skepticism from critics and depressed valuations, it appears that Winter has passed, and that, “Institutional capital is coming.” Per Nick Chong at NewsBTC: “This influx of funding comes in spite of “finance execs’” worries that blockchain as a technological advancement still has an array of drawbacks: lack of regulatory clarity, failure to interoperate, a lack of network continuity, intellectual property concerns, and an inherent inability to scale.”
Money talks, but what if critics are correct, and cryptos do crash to zero? In a recent interview, David Gerard quipped:
That would be good news for Bitcoin, because the Bitcoin critics will have to get proper jobs.