Digital Infrastructure Remains the Key Investment Point


Institutional investors continue to look for key infrastructure projects that will form the future of the crypto industry. Famous investment names like Abrdn, Blackrock,and Charles Swab are launching new crypto-related projects that are in demand by both institutional and retail clients.

Big money is being accumulated amid the booming demand for crypto assets as many believe the cryptowinter will not last long. Indeed, Cryptocurrencies have been suffering from a huge drop since last November as Bitcoin prices (BTCUSD) plummeted from almost $69,000 to $19,000 in June. Ethereum prices (ETHUSD) followed the leading digital currency by plunging in sync from $4,860 to $883 over the same period. Many believe the downside cycle in the cryptomarket is over since prices of the top digital currencies reached peaks of the previous upside cycle of 2017, when Bitcoin hit a high of $19,891 per coin. Some do believe these previous peaks are not brick walls which will provide cryptocurrencies with nothing else to do than plunge further down. The most pessimistic forecast for the major cryptocurrency is that it may dive to $6,000 per coin, which is more than 90% of its peaks and more than 70% off the lows of June.

However, such a dramatic plunge is not seen to be a heavy burden for large investment houses as they base their strategies on long-term perspectives that could be decades long. So, why is big money only coming to the market now, as the market is experiencing a third-tier generation as many new projects emerged during the pandemic years. Partially, it is not true. Big money has always been circulating around the crypto industry, waiting for it to become a more legitimate and mature market. Some big money early birds did enter the market in 2021 after Bitcoin rallied 170% a year before. In November 2020, Guggenheim Partners filed an amendment with the U.S. Securities and Exchange Commission to allow its $5 billion Macro Opportunities Fund to invest up to 10% of the fund’s net asset value in the Grayscale Bitcoin Trust, an ETP that tracks the price of bitcoin. It did go even further to create another fund focused on derivatives that track underlying crypto assets with potential bitcoin exposure. Some prominent investors, including Paul Tudor Jones, also joined the crypto rush as the inflation spirals only stared to pick up to the heart-breaking double digitsof 2022.

Large institutional investors are betting on long-term infrastructure development and crypto services that could be delivered to their customers. So, it is not a matter of hit-and-run strategies that are more attributed to crypto enthusiasts. BlackRock recently came out with its partnership deal with the prominent large Coinbase cryptoexchange to offer the first ever direct token investment product for its clients. Brevan Howard raised more than $1 billion for a crypto fund. Abrdn, one of the largest investment houses in the United Kingdom,announced the purchase of a big stake in the U.K. regulated Archax digital assets exchange that would allow the company to join the board of the exchange. The U.S. prominent investment group Charles Schwab launched an ETF with exposure to crypto without buying crypto currencies themself. Another UK asset manager,Schroders, bought a stake in digital assets manager Forteus in July.

These examples testify that the interest of institutional investors is not waning as digital assets’ prices are going deep down this summer. Some may consider these movements as being a good sign for a possible recovery that is supported by the recent rebound of crypto assets. But these hopes could be wishful thinking as the conditions for short-term investments into risky crypto assets are deteriorating. The U.S. Federal Reserve is likely to continue its monetary tightening throughout 2023. This may badly impact the prices of crypto asset at the onset.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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