Embracing Crypto
As cryptocurrency continues to make waves in the financial world, a new article by Blockworks reveals a significant shift: institutions are increasingly embracing this digital asset class. This is an exciting development that could reshape the future of finance. Let’s take a closer look as Institutions are Embracing Crypto.
Key Points to Cryptocurrency in 2023
1️⃣: Institutional adoption: Traditional financial institutions, including banks and asset managers, are starting to show a growing interest in cryptocurrency. They are investing in digital assets or exploring avenues to provide crypto-related services to their clients.
2️⃣: Creating crypto-focused divisions: Some major institutions are going a step further by establishing dedicated divisions or subsidiaries to exclusively focus on crypto. This demonstrates a long-term commitment to this emerging industry.
3️⃣: Regulatory clarity driving confidence: The increasing clarity in regulatory frameworks surrounding digital assets has given institutions more confidence to enter the crypto space. This development provides a strong foundation for sustainable growth.
4️⃣: Need for diversification: Institutions recognize the potential benefits of diversifying their traditional portfolios with cryptocurrencies. This asset class offers the chance to hedge against inflation and other risks, providing stability in volatile times.
5️⃣: Opportunity for enhanced financial services: Embracing cryptocurrencies opens up new avenues for financial institutions to offer innovative and efficient services. Transactions can be executed faster and at a lower cost, ultimately benefiting customers.
6️⃣: Attracting institutional investors: The institutional adoption of crypto could draw a new breed of investor to the market. As institutions share their positive experiences and institutional-grade products become widely available, more conservative investors may be encouraged to participate.
7️⃣: Impact on the broader market: The increased involvement of institutions in crypto is likely to have a significant impact on the broader market. With their extensive resources and influence, institutions can contribute to its maturation, stability, and mainstream acceptance.
Institutional adoption of cryptocurrencies is fast becoming a significant trend in the financial landscape. Traditional players are recognizing the potential benefits of this digital asset class and are taking steps to integrate it into their business models. This shift is driven by regulatory clarity, the need for diversification, and the opportunity to provide enhanced financial services.
This institutional embrace of crypto will undoubtedly have a transformative effect on the cryptocurrency market. Institutions bring credibility, stability, and deep pockets to an industry that has often been seen as volatile and speculative. Additionally, their entry into the market could help dispel concerns around security, custodial issues, and overall trust.
The involvement of institutional players could also lead to increased adoption by retail investors. As institutions share their positive experiences and more institutional-grade products become available, retail investors may feel more comfortable and confident engaging with crypto. This increased demand could drive further growth in the market.
When the average crypto skeptic changes their mind and dives down the rabbit hole, it’s hardly a newsworthy event. But it’s a different story when the CEO of the largest asset management company in the world performs an about-face.
Years ago, Larry Fink, the head honcho at BlackRock, panned bitcoin as an “index of money laundering.” Now, he touts the technology as digital gold and crypto as an international asset. “Did Larry wake up one day and come to this epiphany?” Santiago Santos asks. “No, I think there’s a lot of institutional demand.”
The angel investor spoke to Blockworks on the Empire podcast (Spotify/Apple) about the reasoning behind the CEO’s attitude shift, and the impact of BlackRock’s moves in the space.
“I don’t think Larry took it upon himself to read the white paper, came to a massive realization and then started sending bitcoin to friends and said, ‘Wow, my God! This is phenomenal!’”
“They are constantly in touch with their largest clients and they see the window here,” Santos says.
When BlackRock sneezes…
Podcast host Jason Yanowitz says people don’t realize just how influential Larry Fink is, arguing he is possibly “the most powerful capital markets person in the entire world.”
“People underestimate that.”
Fink is deeply politically connected, Yanowitz says. When the Federal Reserve “started printing [money] in 2020” and had to start buying corporate bonds to backstop the economy, he says, “Who did they turn to, to do it?”
“BlackRock and Larry Fink.”
“When the FDIC came to wind down the portfolios of Signature and Silicon Valley Bank, who did they have do that?”
“BlackRock.”
Santos explains the influence that BlackRock exerts over the broader economy. “When BlackRock sneezes, the rest of the world catches a cold.” “They have positions in pretty much every major company.”
Changing the narrative
BlackRock’s validation of crypto as an asset class is “probably the most important event in a couple years,” Santos says. It is the necessary “catalyst,” he says, to “change the narrative.”It all comes down to institutional demand, Santos says. “I think they have a lot of interest from clients. That’s the only reason why they would do it.”
Conclusion
Exciting times lie ahead for the crypto industry as institutions wholeheartedly embrace this new asset class. With increasing regulatory clarity, diversification benefits, and the potential to offer innovative financial services, institutions are recognizing the immense potential of cryptocurrencies. Their involvement not only adds credibility but also paves the way for broader market acceptance. As crypto becomes more integrated into traditional finance, we may witness a paradigm shift that alters the way we view and engage with money. Stay tuned for further updates on this evolving landscape!
