According to a recent report by LongHash, public companies in the U.S. currently invest in $10 billion worth of Bitcoin – which can be accredited to increased investment as well the cryptocurrency’s rise in price over the month of October. But is it all good news when institutions invest in Bitcoin?
While the general consensus regarding more institutions getting interested in Bitcoin is fairly positive, the report said:
“In the short to medium term, the positives far outweigh the negatives. But in the next decade or so, if Bitcoin eventually evolves into a global currency atop a store of value, it then could pose certain security risks.”
Public U.S companies alone now own 5% of Bitcoin market cap, and the largest share belongs to MicroStrategy.
Grayscale also reported an AUM of $8.6 billion for the first time today, with the asset management platform purchasing over $600 million worth of BTC in the last 30 days alone.
As a result of increasing demand from institutional investors, CME has continuously seen the most amount of an increase in volume of late.
The market largely perceives the institutional interest as good news, evidenced by the market itself rallying on the news and buying pressure, with BTC up over 22.8% month-to-date.
However, there can be some problems as well.
The first case to be made is, as the price of Bitcoin rises, the dollar value of institutions’ Bitcoin holdings would increase too.
If BTC is indeed as undervalued as some proponents claim, then a significant appreciation in price can imply the dilution of supply to the average investor.
Moreover, Bitcoin is accepted as a currency and central banks perceive it as a threat against fiat money, then the potential risk of seizure could emerge.
As Theta Seek tweeted, these Bitcoin Treasuries in Public Companies may be susceptible to being seized by the government.
Although his comments were met with some amount of speculation, there is a lack of complete regulatory clarity to determine how crypto will be treated by the government.
Perception will play an important role in the way governments treat Bitcoin – if Bitcoin is treated as a safe haven asset over a currency, then governments probably don’t take extraordinary regulatory actions against it.