Crypto is Maturing
Crypto is here to stay! Nearly 15 years ago Bitcoin was born. Since then we have seen an explosion of iterations and new projects alike. The top 20 coins today look very different from just five years ago. In 2017-2018 Bitcoin peaked at unprecedented levels of $20.000. At this point in time crypto was mostly focussed on layer 1 tokens. These are tokens that validate and execute transactions without the need for another network. It was at this point where layer 2 was introduced. A unique idea that allowed us to build and store different types of information on the blockchain resulting in us creating infrastructure through the use of smart contracts. This opened up a whole new level of use cases. The ecosystem currently has around 10.000 applications today, as opposed to 800 in 2017.
Crypto is maturing, and that in turn catches the interest of new parties that were not as involved as before. As such institutional money has also poured into the asset class. And this can be a good thing!
Here is why!
According to a recent joint report by BCG, Foresight and Bitget, 60-70% of the overall trading volume derives from institutional investors. This means that institutions have been pouring large sums of money into the crypto market. This new inflow of money helps the market mature, as it makes the market more liquid. This means that larger market order execution becomes more efficient, with smaller spreads, and enough liquidity to fill up large positions at a specific price point. As a result the market volatility decreases, and brings more stability in the markets.
This in turn allows more conservative institutions to enter the market as well, and start providing services, as well as invest in new crypto projects. If you are a daytrader and love to trade volatility, it is understandable this paints a grim outlook. For the majority of retail investors, there are positive aspects of a maturing market.
As the market matures further, more institutional money can flow in as the liquidity grows. This can help financing new and innovative projects in the future. Institutions can also come in the form of investment funds or retirement funds. Should they start offering their services in the crypto space it would not only allow retail traders to diversify in different instruments in different ways, but it would also provide safer, less risky ways to get involved with crypto. In such a case the management of funds would be done by a professional firm. In the future the retail trader would be able to invest in index funds, and will not have to spend time on trying to select individual assets anymore, or be prone to extreme daily fluctuations and getting caught off guard.
We are still at the beginning
As you were reading, you might be wondering: “Am I too late getting involved in crypto?”. While we are looking into what the future might bring. Certain data tells us that this future is still quite far away.
According to figure 2 below we can see that most of the growth is yet to come, as only 0.3% of individual wealth is invested in cryptocurrency as opposed to equity markets, and less then 0.1% of institutional wealth as opposed to 4% within equity markets.
While it is true that the market is maturing as more institutions are diversifying their portfolio into crypto, there is still plenty of growth potential in the space, and if the equity markets prove to be an accurate benchmark, the best is yet to come!
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The information provided above is not financial advice but for educational and entertainment purposes. Please do your own due diligence or consult a financial advisor before investing in any digital assets.
All opinions expressed on Bitget’s Soapbox (also known as the ‘Soapbox’) are opinions of individual traders using the Bitget platform, and do not reflect the opinions of Bitget or its affiliate companies and partners. The Soapbox author’s opinions are based upon information they confirm to be reliable, but neither Bitget nor its affiliates warrant its complete accuracy, and it should not be relied upon as such.
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