JPMorgan: more institutional investors coming to Bitcoin
More large institutional investors could enter the bitcoin market in the coming years.
Proposing this hypothesis is JPMorgan Chase analyst Nikolaos Panigirtzoglou, who in a recent note suggested that MassMutual’s investment in BTC highlighted the potential for increased institutional demand for bitcoin in the coming years.
According to JPMorgan analysts, bitcoin adoption by Bitcoin System is spreading not only among family offices and wealthy investors, but also among insurance companies and pension funds.
Although they believe it is unlikely that the latter will ever make very large investments, even small percentage investments could have a significant impact on the price of BTC.
Suffice it to say that the entire market capitalisation of Bitcoin to date is around $350 billion, while the M0 money supply of the US dollar alone is over $5 trillion, M1 is over $6 trillion, and M2 is over $19 trillion.
Therefore, with a market capitalisation still so limited, a mass of institutional investments, even if not particularly large, could have a significant impact on the price of BTC.
MassMutual, for example, has only invested 0.04% of its total investment account in bitcoin so far, which is still around $100 million. For example, if they decided to increase this investment to 1% they would have to invest another $2.4 billion.
Imagining another ten or so similar initiatives would easily reach $25 billion, which would move the price of BTC significantly.
Institutional Investors Will Grow Bitcoin
JPMorgan strategists reveal that in the theoretical scenario that all pension funds and insurance companies in the US, eurozone, UK and Japan invest 1% of their assets in bitcoin over the next few years, this would result in an additional demand for BTC of around $600 billion, almost double its entire current market capitalisation.
Moreover, an increase in demand tends to affect the price of BTC with larger increases, not least because market capitalisation is a purely theoretical parameter, not comparable with market demand. In other words, 600 billion of additional demand would not mean a 600 billion increase in market capitalisation at all, but would most likely generate a far greater increase in market capitalisation, and therefore in price.
For now, large institutional investors still face some technical hurdles when it comes to secure investments in bitcoin, but as the case of MassMutual shows, solutions to this problem actually exist.