The year of the institutions

In 2020, bitcoin finally got the attention of institutional investors. The broad financial markets have been volatile amid the COVID-pandemic, but the central banks have intervened pushing monetary stimulus and governments have launched large fiscal stimulus packages. The backdrop of the intervention has been a sharp increase in M2 (+25%) and looming fears of inflation. This in turn brought institutional attention to Bitcoin, due to its store of value properties.

The year of the institutions

In 2020, bitcoin finally got the attention of institutional investors. The broad financial markets have been volatile amid the COVID-pandemic, but the central banks have intervened pushing monetary stimulus and governments have launched large fiscal stimulus packages. The backdrop of the intervention has been a sharp increase in M2 (+25%) and looming fears of inflation. This in turn brought institutional attention to Bitcoin, due to its store of value properties.

The increased institutional presence is clear. Both in terms of esteemed investors publicly commenting on bitcoin allocations to hedge against inflation, but also in terms of market data, most notably the rise of CME’s Bitcoin futures. As of December 29th, CME is now the largest contributor to the open interest in the BTC futures market.

However, 2020 has been volatile including for bitcoin. The broad financial market crash had a heavy impact on bitcoin in March, as bitcoin fell 50% over the span of two days during one of the heaviest sell-offs ever seen in bitcoin. The sell-off was followed by a sustained period of unusually high correlation with the stock markets, but at last, the correlation returned to normal levels, bitcoin decoupled and started its path towards and beyond its former ATH.

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