In the coming years, other large institutional investors may enter the bitcoin market.
This hypothesis is proposed by JPMorgan Chase analyst Nikolaos Panigirtzoglou who in a recent note suggested that MassMutual’s investment in BTC has highlighted the potential for increasing institutional demand for bitcoin in the coming years.
According to JPMorgan analysts, bitcoin adoption is spreading not only among family offices and wealthy investors, but also among insurance companies and pension funds.
Although they consider it unlikely that the latter will ever make very large investments, even small percentage investments could have a significant impact on the price of BTC.
It is enough to consider that Bitcoin’s entire market capitalization to date is around $350 billion, while the M0 money supply of the US dollar alone amounts to over $5 trillion, M1 is over $6 trillion, and M2 is over $19 trillion.
Therefore, with such a limited market capitalization, a mass of institutional investments, even if not particularly large, could have a significant impact on the price of BTC.
MassMutual, for example, has invested only 0.04% of its total investment capital in bitcoin for now, equal to about 100 million dollars. If they decided to increase this investment to 1%, for instance, they would have to invest another 2.4 billion dollars.
Assuming another ten or so similar investments, this would easily reach $25 billion, which would move BTC’s price significantly.
Institutional investors will make Bitcoin grow
JPMorgan’s strategists reveal that in the theoretical scenario where, in the coming years, all pension funds and insurance companies in the US, Eurozone, UK and Japan would invest 1% of their assets in bitcoin, this would result in additional demand for BTC of around $600 billion, almost double its entire current market capitalization.
Moreover, an increase in demand tends to affect the price of BTC with larger increases, partly because market capitalization is a purely theoretical parameter, not comparable with market demand. In other words, an additional 600 billion demand would not mean a 600 billion increase in market capitalization at all, but it would most likely generate a far greater increase in market capitalization, and hence in price.
For the time being, large institutional investors still face some technical obstacles with regard to safe investments in bitcoin, but as the case of MassMutual shows, solutions to this problem already exist.