As Bitcoin Volatility Subsides Institutional Interest Grows
As Bitcoin volatility subsides, more institutions are being drawn to the BTC market.
According to a JPMorgan report, the recent pullback in the price volatility is already attracting the major institutions and if it continues to abate it will help reinvigorate interest from institutional investors, making America’s biggest banks act.
‘These tentative signs of Bitcoin volatility normalization are encouraging. In our opinion,’ says the report. ‘A potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward.’
Bitcoin Volatility Is Dropping
Bitcoin volatility has dropped somewhat over the last few months. After rising above 90% in February, it has dropped to 86% for the three-month measure. And looking further out, the six-month measure is as low as 73%.
The report explains Bitcoin volatility is one of the key reasons institutions have stayed away until recently, as the risk management institutions look for smoother rides.
And while that might be the case for some institutions, many traders are drawn to Bitcoin for its volatility, as they see it as a way to make bigger gains.
Bitcoin Taking Shine Off Gold
JPMorgan strategists have also mentioned the way Bitcoin is absorbing value from gold. According to the report, Bitcoin has seen $7 billion of inflows, while at the same time $20 billion of outflows from gold ETFs has seen gold underperform at a time when it would be expected to shine.
Many gold bugs cling onto the belief that gold will smash its all-time high and even reach as high as $10,000 in the next five years. And while it should do well, it’s clear that the world’s biggest investors are looking closer at Bitcoin.
Institutional Interest In Bitcoin
Many institutional investors have stayed away from Bitcoin. It could be down to Bitcoin volatility or the regulatory pressure. Whatever the reason, the investment banks have shied away from Bitcoin.
After institutions have watched Bitcoin drop 90% in 2018 and rise over 1000% in the last 12 months, however, it’s clear the demand from the banks’ clients is urging them get involved.
Morgan Stanley became the first big US bank to start offering Bitcoin to its clients. Last month, the investment bank succumbed to pressure and announced it would start offering three funds that enable ownership of Bitcoin.
The bank is only allowing its wealthier clients access to what it calls ‘the volatile asset’ and claims it’s only suitable for people with an aggressive risk tolerance and at least $2 million in assets held by the bank.
While Morgan Stanley claims Bitcoin is too volatile for its not-so-wealthy customers, rival bank Goldman Sachs has gone a step further and filed an ETF proposal for innovative companies and Bitcoin.
The ETF will focus on companies that Goldman Sachs considers to be offering ‘disruptive innovation’, and says that exposure to Bitcoin is one of the main points of this operation.
Morgan Stanley also announced this week that it would start offering a ‘full spectrum’ of Bitcoin investment products, ranging from ‘physical bitcoin, derivatives or traditional investment vehicles’ within the next couple of months.
Bitcoin Volatility Is Your Friend
Whether its a decline in Bitcoin volatility or pressure from the banks clients, its clear institutional interest in Bitcoin is rising.
Banks had no option, and this is only the beginning. It will be interesting to see what happens when the Bitcoin volatility picks back up, because no matter how much institutional money comes in, we will see more big price drops. And rises.
Bitcoin will be volatile until there is about $5 trillion in the market. And until then, there is more gains for savvy traders who make gains from Bitcoin’s wild swings.
