This time, institutional and retail investors are both keen to accumulate Bitcoin, and data from crypto derivatives markets shows institutional investors are driving Bitcoin volumes to new highs.
According to research from Grayscale Investments, a digital asset management company that currently holds over $9.8 billion in assets under management, the coronavirus pandemic may be a primary driver of Bitcoin’s current rally.
According to the company’s yearly survey, 83% of all Bitcoin investors started in the last 12 months, a time when COVID-19 infections were minimal.
38% of all current Bitcoin investors interviewed joined in the last four months, and among these, 63% say that the economic disruption caused by COVID-19 positively influenced their decision to purchase BTC.
Bitcoin is becoming mainstream
Grayscale’s survey also shows that Bitcoin is becoming more mainstream with the general public and investor class. The outlook among those who have yet to invest in Bitcoin has changed considerably since 2019. In 2020, 55% of the investors interviewed expressed interest in acquiring Bitcoin, a substantial increase from 36% in 2019.
Nearly half of the survey participants believe that cryptocurrencies will be regarded as mainstream mediums of exchange by the end of the decade.
The trend of investors being drawn to Bitcoin’s store-of-value narrative is likely to increase, and it’s possible that mainstream adoption may come sooner than most pundits and investors expect. Minimal proof of this comes from a recent report from Citibank, in which the author estimates that Bitcoin price may reach $318,000 by December 2021.
Will Bitcoin lose its allure once COVID-19 is gone?
The question of how Bitcoin price will react to the eradication of COVID-19 is a valid question on the mind of some investors. According to Jonathan Hobbs, the author of The Crypto Portfolio and a former digital asset fund manager, the effects of the pandemic will be felt long after the disease itself has been controlled. Hobbs told Cointelegraph:
“Covid-19 was the match that lit the flame for institutional adoption. But the firewood was building up long before it. Now that the fire is burning, it will take a lot of water to put it out. When the world is finally cured of Covid-19, the economy will still be sick with debt. And central banks will continue to print money to try and inflate away those debts, like they have done since the 2008 financial crisis. This means the institutional narrative of bitcoin being an inflation hedge is likely to continue long after the pandemic is over.”
Clearly, the massive economic stimulus and expanding monetary policy resulting from the negative impacts of the coronavirus have changed the economic landscape for the foreseeable future.
While some analysts may overestimate how the coronavirus pandemic impacted Bitcoin’s 2020 rally, it is clear that it played a role in accelerating investors' interest in cryptocurrencies.
One of the main positives identified by investors is Bitcoin’s low entry barrier and it’s demonstrated ability to gain value when there is volatility in traditional markets. These factors are likely to continue to hold, even when the pandemic ends.