Wednesday, May 29, 2024 ▪
4
min reading ▪ acc
The year 2024 marks a turning point for cryptocurrencies. Institutional investors, once cautious, are now plunging into this market with unprecedented vigour. Capital flows are at record highs, reflecting growing interest in digital assets. This dynamic promises upheavals in the global financial environment.
The rise of institutional investment
Since the beginning of the year, financial institutions have invested huge sums in cryptocurrencies. As hedge funds bid for the fall, $1 billion was added to crypto-denominated assets last week, bringing inflows to $14.9 billion for 2024. That number far surpasses the previous record of $10.6 billion set in 2021 .
The reason for this madness? Increased confidence in the stability and growth potential of cryptocurrencies. According to James Butterfill, head of research at CoinShares, “The only other year to reach these levels is 2021.” This trend is being driven by the growing adoption of blockchain technologies and a better understanding of the benefits they offer, such as decentralization and increased security.
Ethereum and Bitcoin: the stars of the crypto market
CoinShares’ weekly report reveals that Ethereum is particularly popular with institutional investors. Institutions bought $36 million last week, the most since March. This increase can be attributed primarily to the SEC’s approval of spot ETFs on Ethereum, which has sparked renewed interest in the asset.
However, Bitcoin remains the undisputed leader. With $1.05 billion added to their portfolios last week, institutions continue to favor the cryptocurrency. Cumulative Bitcoin flows now reach $14.6 billion per year. This phenomenon is explained by the perception of Bitcoin as a store of value comparable to gold, which offers protection against inflation and economic uncertainties.
Challenges and prospects for 2024
Despite this meteoric rise, the cryptocurrency market is not without problems. Outflows from Grayscale, the largest provider of bitcoin ETFs, have slowed but remain significant. The company holds 34% of the market with 288,000 BTC, or $19 billion. However, year-on-year outflows reach $17 billion. This slowdown could indicate stabilization, but also increased caution among investors in the face of market volatility.
Ethereum, on the other hand, has seen a cumulative outflow of $22 million this year, despite a week of recent gains. Ethereum advocates hope that ETF approval will reverse this trend and revive institutional interest.
2024 is already shaping up to be a record year for institutional cryptocurrency flows. The amounts invested demonstrate the renewed confidence and growing adoption of digital assets by major financial players. However, these dynamics must be closely monitored as volatility and uncertainties remain factors to consider. The next few months will be crucial to see if this trend continues and what effects it will have on the overall cryptocurrency market. One thing is certain: the global financial landscape is changing, and cryptocurrencies are a major catalyst.
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Fascinated by Bitcoin since 2017, Evariste continued to research the topic. If his first interest was trading, now he is actively trying to understand all the developments focused on cryptocurrencies. As an editor, he strives to consistently deliver high-quality work that reflects the state of the industry as a whole.
DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.