How Are Companies and Institutions Investing in Crypto?
Only a few years ago, investing in cryptocurrency seemed like a waste of time and money for the average person. But the investment world has changed, and opinions change with it. Investing in digital assets isn’t such a far-fetched, risky enterprise anymore—thanks (in large part) to institutional money in crypto.
Market volatility has encouraged many investors to steer clear of crypto investment opportunities. However, various reputable companies have moved their chips to the center of the table and sweetened the pot for everyone. Companies and institutions have several ways to invest in crypto—and good reasons for doing so.
Crypto on Balance Sheets
Bitcoin was the first decentralized cryptocurrency, and it remains the most popular to date. Bitcoin uses blockchain technology to allow individuals or entire institutions to transfer digital currency without going through third parties like banks and credit card companies. Having Bitcoin on a balance sheet is one of the most common ways organizations invest in crypto.
In less than a decade, the value of one bitcoin (1 BTC) skyrocketed from a few hundred dollars to thousands. This is mainly due to investors increasingly purchasing and selling Bitcoin as an investment, hoping their value will increase over time. Bitcoin has especially grown in popularity as more companies accept it as payment for goods and services, such as:
- Buying products from Amazon
- Purchasing tools and devices from Microsoft
- Booking accommodations with Expedia
- Ordering food at Subway
- Purchasing and activating gift cards
While many companies and institutions are investing in Bitcoin, they’re also investing in blockchain. Blockchain is the technology that powers Bitcoin, Ethereum, Litecoin, and other digital currencies. It allows users to send and receive payments instantly without going through a central bank or other financial institution.
Bitcoin Exchange-Traded Funds (ETFs)
Another common way companies put institutional money into cryptocurrency is through an exchange-traded fund—ETF, for short. While organizations often invest directly in crypto by holding Bitcoin on their balance sheets, they also invest indirectly through ETFs.
An ETF is a specialized fund that tracks a specific index, commodity, or group of assets. A Bitcoin ETF, therefore, is a particular fund that tracks bitcoin values. You can buy, sell, and trade bitcoins using the traditional stock market exchange via brokerages instead of using dedicated crypto trading platforms.
Bitcoin ETFs are investment options for many organizations throughout the world. However, the United States has yet to approve crypto exchange-traded funds.
Bitcoin Futures ETFs
The U.S. government hasn’t approved Bitcoin ETFs but has given the okay to Bitcoin Futures ETFs. As the name suggests, this type of futures ETF allows investors to sign financial contracts on the price of Bitcoin in the future. It’s a prevalent form of crypto investment among large institutions because it gives them access to complex crypto trading strategies without having to deal with traditional cryptocurrency exchanges like Coinbase or Kraken.
You may wonder how companies can invest in crypto with a retirement plan or 401(k). A crypto 401(k) works just like a traditional 401(k), except it uses cryptocurrency instead of paper currency. Some retirement savings providers in the U.S. allow employees and employers to contribute crypto to a 401(k) and invest in the future before a dime reaches their bank accounts.
Have you heard of the metaverse—a digital world where humans interact via avatars? It sounds like something out of a sci-fi movie, but it’s much closer to reality than many realize. Facebook’s recent rebranding as Meta has caused quite a stir in the crypto investment community.
The metaverse has its own economy, with ways to earn virtual income, buy virtual products or services, and exchange virtual goods. To purchase virtual items, you’ll need to have virtual currency. Many big-name companies already realize this and are investing crypto into the metaverse to get a head start.
Non-fungible Tokens (NFTs)
Companies have also invested in crypto using non-fungible tokens (NFTs). NFTs are digital assets representing anything from digital artwork to physical objects, and they’re a popular form of cryptocurrency among financial institutions. Some have invested in cryptocurrencies directly through initial coin offerings (ICOs) or by buying Bitcoin or Ethereum on exchanges, while others have purchased NFTs for their own use or investment purposes.
Decentralized Finance (DeFi)
Banks, brokerages, exchanges, and other intermediaries often help companies invest institutional money in crypto. However, these go-betweens can also complicate the transaction and charge all kinds of fees. This is where decentralized finance platforms come into play.
Decentralized finance, or DeFi, takes third parties out of the equation so buyers and sellers can interact directly. DeFi platforms offer encoded smart contracts to ensure that everyone follows the contract terms and conditions, helping save money while maintaining security. Some of these platforms reach out to institutions, but many institutions go to them first for crypto investment opportunities.
Crypto Institutional Investors List
Highly reputable companies across the globe have already invested in crypto. We can’t name them all, but the crypto institutional investors list includes:
How Regulations Are Impacting Crypto Investments
One major setback to companies putting institutional money in crypto involves the lack of regulations. The crypto space has few restrictions, and those it does have are often too lax to provide stability and confidence. For this reason, many financial institutions have hesitated to go all in.
Cryptocurrency is similar to any traditional currency when it comes to regulations. If you don’t regulate who can invest, when they can invest, and how much, you risk flooding the market and devaluing your assets. On the flip side, providing too many restrictions can make investing difficult and result in a lack of interest.
As the crypto industry grows increasingly sophisticated, we’ll likely face more regulations. This can help build confidence in financial institutions and encourage them to continue investing. Many companies already want to, but they need more regulations to protect their assets.
Why Invest in Crypto?
Investing in crypto isn’t just for multi-million-dollar companies and world-famous businesspeople. You can invest in crypto right now and pave the way for a brighter financial future. Many reasons exist to start investing today.
Crypto Is Different From Traditional Currency
If you’re new to the crypto space, it’s essential to understand that it’s unlike traditional currency. It doesn’t have a central bank or government to regulate and influence the market, and no gold supports its value. Cryptocurrencies like Bitcoin and Ethereum have no physical form—the technology itself backs them up.
Crypto transactions can work through DeFi platforms, allowing you to buy, sell, and trade digital assets without intermediaries. This means no extra fees, unnecessary paperwork, and communication issues.
Crypto Helps Diversify Your Portfolio
Asset diversification plays a crucial role in helping investors keep their wealth secure and make higher returns in the future. A diverse set of investments can help you stay on track with your goals, no matter what happens in the market. Cryptocurrency has proven itself to be an excellent addition to this strategy, enabling investors to gain exposure to assets that don’t correlate with other parts of their portfolios.
When the stock market suffers, savvy investors turn to other, more stable markets for security. This strategy keeps you from placing all your eggs in one basket, just in case that basket suddenly goes up in smoke. Crypto can help you diversify your portfolio and make money even when other investments aren’t working out so well.
There’s an Increasing Demand for Crypto
Crypto is still relatively new on the investment scene, but it’s quickly gaining traction. More and more people have turned to digital assets and will likely continue to do so with more institutional money in crypto. While its price may vary depending on the day and who you ask, it has grown exponentially over time—not just in terms of value but also in terms of public interest.
Traditional assets like stocks and bonds have always provided ample investment opportunities. However, investors are increasingly looking for alternative assets for portfolio diversification and asset protection. With this rising demand and interest, even a small crypto investment today could pay enormous dividends in the future.
Inflation Doesn’t Affect Crypto
Over time, we’ve seen inflation erode the value of the U.S. dollar. A quarter doesn’t go nearly as far today as it did 50 years ago. Several factors contribute to this depreciation, including:
- National debt
- International conflicts
- Supply and demand
- Interest rates
Unlike paper currency, these factors don’t affect cryptocurrency. The crypto space operates outside of governments and central banks that manipulate interest rates and can cause inflation. In this sense, crypto is often a much safer investment than cold hard cash.
By investing in crypto, you will own an asset that doesn’t fluctuate based on economic events and geopolitical strife. Instead, you’ll have an investment that only increases in value as more people use it.
Learn More About Investing in Crypto
Investing in crypto is an excellent way to protect your wealth and hedge your funds against economic uncertainty. Crypto uses DeFi platforms to make your transactions as smooth and cost-effective as possible. The interest in digital currency has also increased since there is now more institutional money in crypto.