Crypto Growth Is Too Big To Ignore For Traditional Finance
Crypto adoption continues to rise to unprecedented levels, with expanding use cases allowing millions of people to earn, save, and grow their wealth in new ways.
According to Chainalysis, the past year has seen an astonishing 880% increase in global crypto adoption. While this figure may seem amazing, it represents the ease with which traders and investors from Nigeria to the Philippines can quickly trade multiple crypto and fiat currencies. A Galaxy Digital report showed that venture capitalists have invested more than $33 billion in crypto and blockchain startups, a milestone for the industry as the Web 3 movement continues to heat up.
Crypto adoption has not been limited to retail investors. Institutional investors continue to move through the crypto space as they seek out high-growth investment opportunities for their clients. Yields on 10-year US Treasuries, for example, have resulted in paltry returns for investors of 1% over the past few years.
Funds and publicly traded companies are starting to invest in digital assets like bitcoin and ether, both of which offer a better return on investment than traditional safe harbor assets like government bonds, even taking account of the inherent volatility of crypto markets. Dollar stablecoins have also become an attractive asset, offering returns to investors ranging from 2% to 12%. Some of the next-gen decentralized finance and emerging metaverse tokens represent a new frontier that is already attracting widespread investor interest.
Even longtime banking skeptics have reversed their initial hesitation, with Goldman Sachs relaunching its crypto trading desk last year and JPMorgan continuing to experiment with its own digital asset, JPM Coin.
As customers continue to demand exposure to this new, high-growth asset class, more banks will offer varying degrees of crypto exposure to their customers. Morgan Stanley, for example, already offers bitcoin exposure to its high net worth and wealth management clients, while Goldman Sachs now regularly publishes prices for key benchmark digital assets for the large institutional clients they serve. Bank of America has taken a particularly progressive approach to digital assets, launching crypto futures trading to screen clients while calling the crypto industry’s combined $2 billion market capitalization “too much”. big to ignore”.
The changing attitudes of major financial players, combined with the launches of several bitcoin exchange-traded funds and the steady growth of institutional-grade funds like Grayscale, underscores that a new financial era is coming.
The key for the entire industry now is to continue this growth into 2022 and beyond.
Decentralized finance continues to attract increasing levels of interest in the institutional landscape, while vertical markets like the metaverse and non-fungible tokens have undoubtedly entered the mainstream, in turn catalyzing new participation within of the crypto ecosystem.
Experts continue to point out that regulatory clarity is the biggest hurdle, preventing more companies and institutions from getting more involved in the crypto space. Fortunately, a broader and more comprehensive regulatory framework is quickly emerging in jurisdictions that contain major crypto markets – the United States, European Union, and United Arab Emirates.
Any new regulations should strive to make participation in the crypto space as inclusive and accessible as possible, protecting traders, investors and funds from scams while promoting and encouraging innovation.
Greater momentum around crypto regulation and legislation will ultimately reinforce change, potentially spurring new levels of innovation throughout the space. An open and progressive approach to technological innovation could provide a rising tide that lifts participants across the industry.
The institutionalization of the crypto industry is at a critical inflection point in terms of growth. The focus on regulatory clarity and increased flow between traditional finance and the crypto ecosystem could open up significant opportunities for growth and innovation.
Stephen Stonberg is Managing Director of Bittrex Global.