Institutional investors' interest in Bitcoin is on the rise

Although the price of Bitcoin has fallen by 52% from its historical high in 2017, institutional investment in it has risen significantly. The main factors driving institutional funds into Bitcoin in 2020 include: the positive attitude of well-known investors, the maturity of Bitcoin, and the continuously strengthening fundamentals.

The asset management scale of Grayscale Bitcoin Trust ( AUM ) is often used to measure the participation of institutional investors in Bitcoin. When the price of Bitcoin reached an all-time high in 2017, the AUM of this trust was 2.966 billion dollars. As of June 23, 2020, this figure had exceeded 3.5 billion dollars, representing an increase of about 20% from its historical peak.

It is worth noting that the proportion of institutional investors investing in Grayscale products has significantly increased. In the first half of 2018, the proportion of institutional investors was 56%, while in the first quarter of 2020, this ratio soared to 88%. This indicates a significant rise in institutional investors' interest in cryptocurrency investment tools.

Recently, some major financial institutions have also changed their attitude towards Bitcoin. For example, JPMorgan has shifted from previous criticism to a more positive stance. The company's analysts believe that Bitcoin shows resilience and provides banking services for cryptocurrency exchanges. At the same time, some well-known investors like Paul Tudor Jones have also started allocating a portion of their assets to Bitcoin, viewing it as a tool to hedge against fiat currency inflation risks.

The continuous maturation of the Bitcoin network is another important factor attracting institutional investors. From June 2019 to June 2020, the hash rate of the Bitcoin network rose from 57 million TH/s to 105 million TH/s. Even after the block reward halving in May 2020, the hash rate quickly recovered, demonstrating the resilience of the network.

In addition, the decline in Bitcoin reserves at cryptocurrency exchanges is also seen as a signal of increasing institutional demand. This suggests that retail investors' trading activities may be decreasing, while institutional investors' participation is on the rise.

However, not all financial institutions are optimistic about the long-term prospects of Bitcoin. Goldman Sachs has stated that hedge funds trade cryptocurrencies mainly due to their high volatility, rather than based on viable investment rationale.

Overall, there is still a divergence in the views of institutions and high-net-worth investors regarding Bitcoin. Some believe it will become a mature store of value and a reliable safe-haven asset, while others expect its rise potential to be limited. However, the continuous improvement in Bitcoin's fundamentals is undoubtedly attracting the attention of more and more institutional investors.