Bitcoin's Growth and Institutional Adoption

📈The last week or so, I’ve been almost entirely focused on Capitol Hill—watching the drama around passage of GENIUS and CLARITY, digesting the Senate Banking Committee’s new digital asset market structure discussion draft, meeting with policymakers, and even testifying on AI crime. It’s been a whirlwind stretch for crypto policy, with lawmakers on both sides of the aisle laying down serious markers on everything from stablecoins to market oversight to illicit finance. But in the midst of all the policymaking, two stories broke that could, in the long run, prove even more consequential for the future of digital assets. Because at the end of the day, it’s not Washington that will decide the fate of crypto. It’s the market. 🏦 First, PNC Bank and Coinbase announced a major strategic partnership aimed at integrating digital assets into traditional banking infrastructure. PNC customers will gain access to Coinbase’s crypto custody and investment services through their existing banking relationship, a step that effectively blends institutional-grade blockchain services with mainstream consumer finance. The move signals growing demand from legacy financial institutions to offer secure digital asset solutions to their clients—aligned with the vision behind GENIUS, CLARITY and the Senate draft, which emphasize custody, compliance, and stability in digital asset markets. 📱Second, Telegram launched its self-custodial TON Wallet to more than 87 million U.S. users. The wallet—embedded directly within the Telegram app—enables peer-to-peer transfers, token swaps, staking, and zero-fee onramps through MoonPay. It’s a dramatic re-entry into the U.S. market for a project once sidelined by the SEC, which sued Telegram in 2019 to block its initial token launch. Combined, these developments show where the digital asset ecosystem is headed—toward convergence between fintech, crypto, and traditional finance, with real-world adoption happening in parallel to the legal clarity coming from legislation.

What's the most obvious thing that I expect to see happen this cycle that nobody is talking about? Banks in the US are going to start looking around, wondering why Coinbase gets to custody of all of the Bitcoin (and future ETH?) ETFs, earning all of the fees in the process. And they are going to want in on the action. Which means we might be closer to crypto regulation than people realize in the US (the upcoming election will certainly play a role). Some incumbents may have been incentivized to try to impede crypto in the past. But now that the cat is out of the bag, the incentive is more likely to flip to the other side. As this occurs, crypto and the financial system will slowly become integrated. My thesis is that this will take place across two phases: In phase 1 (currently underway), regulated asset managers and financial service providers will begin offering customers access to new crypto-based financial products such ETFs, SMAs, indices, tokenized securities, staking products, etc. In phase 2, the more agile incumbents will build "on top" of public blockchains and DeFi infrastructure — offering new financial services via familiar, regulated interfaces —while leveraging DeFi protocols and public blockchains under the hood. In this way, DeFi brings the tech. TradFi brings the distribution. Not only can the two win together, but investors that access these new financial products early (in phase 1) could benefit from institutional adoption of the underlying tech that is poised to come later (phase 2). The key takeaway? If I've said it once, I've said it a thousand times: If you want to understand why crypto is unstoppable, you need to understand game theory, economic incentives, the core value prop of public blockchains, and the unwavering popularity of the space. ---- We covered this in detail recently for readers of The DeFi Report If you'd like to access our latest research, The Institutional Investors Guide to Ethereum, see the link in the first comment.

If you’re not invested in crypto and you’re having FOMO, you’re not the only one.   Several institutional investors, including pension funds and registered investment adviser-based vehicles, are determined to change the investment landscape. This is spurred by the fact that the first-ever spot Bitcoin exchange-traded fund (ETF) may be approved by the US SEC by 𝐉𝐚𝐧𝐮𝐚𝐫𝐲 3𝐫𝐝. The anticipation has seen Bitcoin soar to $45,000 for the first time since April 2022. But why is the Bitcoin ETF so significant that even pension funds and investment managers are willing to invest in this asset class? It can be put down to the following reasons:   1. 𝐈𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐢𝐨𝐧𝐚𝐥 𝐀𝐝𝐨𝐩𝐭𝐢𝐨𝐧: A spot Bitcoin ETF would provide a regulated investment vehicle for institutional investors. These players often have mandates or regulations that limit their ability to invest directly in crypto. The ETF structure allows them to invest in Bitcoin without directly holding the asset. 2. 𝐖𝐢𝐝𝐞𝐫 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐀𝐜𝐜𝐞𝐬𝐬: ETFs are popular investment vehicles among retail investors. The approval of a spot Bitcoin ETF would make it easier for a broader range of investors, institutional and retail, to invest. This increased accessibility could lead to a more diverse investor base. 3. 𝐋𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲 𝐁𝐨𝐨𝐬𝐭: ETFs typically trade on traditional exchanges, providing liquidity and ease of trading. The creation of a spot Bitcoin ETF could enhance liquidity in the Bitcoin market, making it more attractive to institutional investors who often require liquid markets for sizable investments. 4. 𝐑𝐢𝐬𝐤 𝐇𝐞𝐝𝐠𝐢𝐧𝐠 𝐰𝐢𝐭𝐡 𝐃𝐞𝐫𝐢𝐯𝐚𝐭𝐢𝐯𝐞𝐬: The existence of a spot Bitcoin ETF could drive the development and expansion of Bitcoin derivatives markets. Institutional investors may use derivatives to hedge their positions, manage risk, and navigate the volatility of the crypto market. 5. 𝐌𝐚𝐫𝐤𝐞𝐭 𝐕𝐚𝐥𝐢𝐝𝐚𝐭𝐢𝐨𝐧: Approval of a spot Bitcoin ETF by the U.S. SEC signals regulatory acceptance and maturity for crypto. It could encourage more institutional investors to explore and participate in the market. 6. 𝐏𝐫𝐢𝐜𝐞 𝐈𝐦𝐩𝐚𝐜𝐭: The launch of a spot Bitcoin ETF could have a direct impact on the price of Bitcoin. However, the market's response can also be dynamic and influenced by various factors. 7. 𝐌𝐚𝐫𝐤𝐞𝐭 𝐄𝐱𝐩𝐚𝐧𝐬𝐢𝐨𝐧: A regulated spot Bitcoin ETF could pave the way for additional cryptocurrency-related financial products and instruments. This, in turn, could contribute to the overall growth and acceptance of crypto in the traditional financial ecosystem. This is a crucial step in integrating crypto into the broader financial markets and expanding their adoption among various investor groups. As the January 3rd date approaches, the potential implications for the cryptocurrency market's development and maturation are huge. And we may have asset managers like BlackRock to thank for it.

"If portfolio managers were to apply the same level of due diligence in analyzing cash options as they do evaluating stocks, they might recognize the importance of considering the monetary policy of the nation issuing that particular currency. Questions about fiscal deficits, debt sustainability, and foreign demand for a nation’s debt, should inform any decision to allocate towards cash. Yet, all too often, cash is instead treated as a passive, conservative non-action, devoid of the scrutiny applied to other exposures of the portfolio. In this context, bitcoin emerges as a compelling alternative. As a decentralized form of money immune to government manipulation and debasement, bitcoin offers a differentiated alternative to state-backed fiat currencies. Unlike fiat currencies, which are subject to arbitrary inflation targets and political agendas, bitcoin’s long-term purchasing power is ensured by its programmatic scarcity, enforced by immutable code and social consensus. By allocating a portion of traditional cash holdings to bitcoin, investment managers can transform dormant capital (guaranteed to erode over time) into a dynamic allocation poised for growth, mitigating the inflationary risk inherent in fiat cash holdings while maintaining the strategic liquidity necessary for opportunistic investments." https://lnkd.in/gtSHt95W

A recent development in Europe that has received relatively little media attention, is poised to significantly facilitate the adoption of Bitcoin worldwide. Specifically, the Economic Affairs Committee of the European Parliament has approved legislation that will permit banks to hold up to 2% of their capital in cryptocurrencies such as Bitcoin, beginning in January 2025. This move is a crucial component of the final stage of Basel III regulations for bank capital requirements. While Bitcoin has been designated as the riskiest investment class under Basel III, this decision represents an official acknowledgement by the EU of Bitcoin's increasing importance in the financial sector. Although cryptocurrencies will be treated similarly to other speculative investments, this development will bring digital assets into the regulated framework of European banking. Another decisive step towards greater Bitcoin adoption! #quantaraxia #money #management #investing #hedgefunds #business #entrepreneurship #cryptocurrency #bitcoin

There currently seems to be an insatiable demand for #bitcoin ETFs. Inflows have accelerated in the last week! 📈 A rising tide lifts all boats 🚢 , and bitcoin will benefit from increased access from these ETFs. They are great vehicles for people who only care about bitcoin's inherent Number Go Up (NGU) technology and are perfectly fine with the prospect of ending up with more dollars at the end of the trade. I believe it will also be a good vehicle for short-term traders, given the relatively low fees and tight spreads offered by the most liquid ETFs. However, there are many other people and organizations with interest in bitcoin beyond NGU. There are severe limitations when you gain exposure to bitcoin via an ETF: 👎 it's relegated to US markets and those who have access to them 👎 it only trades about 25% of any given week. What if you want to buy or sell on a Saturday? 👎 it's guaranteed to have fees, which is not necessarily the case with spot bitcoin 👎 and most importantly, it can't be used as MONEY After all, MONEY is bitcoin's primary use case. By holding spot bitcoin instead of the ETF, you can: 👍 access it 24/7/365 ⏱ 👍 from anywhere in the world 🌍 👍 in a permissionless manner 🔑 👍 trade it in the economy where it's accepted (this is growing!) 🛍 👍 and STILL get all of the benefits of NGU technology 📈 Certain economic actors, like large corporations and governments, will almost certainly buy spot bitcoin instead of bitcoin ETFs. When Apple adds bitcoin to its balance sheet and incorporates it into Apple Pay, it will use spot bitcoin. When the Argentinian government makes bitcoin legal tender and buys bitcoin for its reserves, it will do so in the spot market. What would be the point in buying something that is still exposed to the global dollar financial system? More choice in exposure to bitcoin is a good thing - everything is good for bitcoin! The ETFs will certainly drive further adoption. The question for you is this: As you consider your first bitcoin allocation, in your personal name or for your business treasury, what is your thesis? The more adoption bitcoin gets, the more enticing it is to use it as money beyond NGU, and therefore, the more it makes sense to buy real bitcoin instead of just paper exposure.

“The increased correlation between crypto and equities coincides with the growth in the participation of institutional investors in crypto markets since 2020. Although institutions’ exposure is small relative to their balance sheets, their absolute trading volume is much larger than that of retail traders. In particular, the volume of trading by institutional investors in crypto exchanges increased by more than 1700% (from roughly $25 billion to more than $450 billion) from 2020Q2 to 2021Q2”

Spot Bitcoin ETFs have dramatically outpaced miner output, absorbing 10 times the BTC produced on February 12th alone. Over $493.4 million flowed into ETFs, significantly led by BlackRock’s iShares and Fidelity’s Wise Origin Bitcoin Fund, with Ark 21Shares also seeing substantial inflows. This trend showcases a soaring institutional demand for Bitcoin, with ETFs absorbing a staggering amount compared to the $51 million worth of BTC mined that day. Anthony Pompliano highlighted on CNBC’s Squawk Box that Wall Street's demand for Bitcoin far exceeds daily production, emphasizing the asset's tightening supply. With 80% of Bitcoin's total supply stagnant over the last six months and only $200 billion considered tradable, these ETFs have captured 5% of Bitcoin's tradable supply in just 30 days. This scenario suggests a significant shift in Bitcoin’s market dynamics, hinting at potential impacts on supply, demand, and price volatility. As ETFs continue to draw in Bitcoin at such a rapid rate, the cryptocurrency market is poised for evolving investment patterns and valuation considerations. I'm curious to see the impact on the market and will be watching closely... 👀 #bitcoin #etfs #cryptocurrencymarket #investmenttrends

I talk a lot about “The Bitcoin Economy” with clients. This is the capital markets building on top of and with the Bitcoin network. When you zoom out it’s incredible. Just a few facts: - Bitcoin trades > $80 billion per day - Trading volume across multiple institutional products like Perpetuals, US futures, ETF, Options, Structured products, OTC, and Spot. - it’s estimated Bitcoin collateralized loans range between 30-$40bn. Across CeFI and DeFi. - J.P. Morgan just announced intent to lend against Bitcoin. - the FHFA OIG just announced they will allow mortgage lenders to use Bitcoin as part of net assets. - PNC Bank just integrated Coinbase Institutional Crypto-As-A-Service to offer solutions around Bitcoin to their millions of customers. - Coinbase wallet integrated Morpho, a web3 borrow-lend protocol allowing any retail user to borrow against their Bitcoin (just crossed $1bn borrowed and over collateralized) And when we talk about $6bn of #cbBTC in circulation onchain as “tokenized Bitcoin”.. this is yet another example of the growth of the Bitcoin economy. Bitcoin is a digital store of value. It travels across digital networks. Check out the latest “Charting Crypto” report by David Duong, CFA for some incredible insights. https://lnkd.in/gyZzacAt

"𝐋𝐞𝐚𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐡𝐚𝐫𝐠𝐞 𝐢𝐧 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐈𝐧𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧: 𝐀𝐬𝐬𝐞𝐭 𝐌𝐚𝐧𝐚𝐠𝐞𝐫 𝐀𝐛𝐫𝐝𝐧 𝐚𝐧𝐝 𝐂𝐫𝐲𝐩𝐭𝐨 𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞 𝐀𝐫𝐜𝐡𝐚𝐱 𝐚𝐫𝐞 𝐚𝐭 𝐭𝐡𝐞 𝐅𝐨𝐫𝐞𝐟𝐫𝐨𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐄𝐱𝐜𝐢𝐭𝐢𝐧𝐠 𝐑𝐚𝐜𝐞 𝐭𝐨 𝐓𝐨𝐤𝐞𝐧𝐢𝐳𝐞 𝐓𝐫𝐚𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐅𝐢𝐧𝐚𝐧𝐜𝐞!" 🌐 Archax, a #crypto firm regulated by the FCA, and abrdn, a major investment firm, have launched an institutional-grade money-market fund token, leveraging #blockchaintechnology for #asset representation, aiming to improve operational and cost efficiencies. 💼🔗 💰 The #tokenized money-market fund, using the Hedera Hashgraph system, is available for investments as low as $5,000, opening opportunities for a broader range of investors and attracting significant interest with a $400 million customer pipeline. 📈 🏦 The token acts like a yield-bearing stablecoin and can be used as collateral for trades, appealing to businesses and investors, especially in a higher interest-rate environment where there's a push to generate returns on assets. 💹 🔄 Archax plans to introduce trading pairs between the abrdn money-market fund #token and #bitcoin, allowing users to trade bitcoin against U.S. dollar-denominated money-market fund tokens, diversifying trading options beyond traditional fiat or #stablecoins. ₿💱 🚀 This innovation reflects a growing trend in the financial industry towards #tokenization of traditional assets and the exploration of new models in decentralized finance, particularly in response to changing economic conditions and the need for more flexible capital allocation. 🌟📊 For more information → https://lnkd.in/gY6AB9hF Gregory Stone, Ken Chapman, Breige Tinnelly, Simon Barnby, Nick Donovan, Rene Buehlmann, Bill Genovese, Simon Taylor, Vicky Brown, Ned Menton, David Wax, Harshal C., Penny M.