Crypto Assets market welcomes a new wave, institutional investors accelerate to get on board

Bitcoin's recent strong performance has attracted widespread attention. Just 10 days after a certain electric vehicle manufacturer invested 1.5 billion dollars to purchase Bitcoin, the paper profit reached 800 million dollars, surpassing the company's automotive business profits over the years. This move, along with the follow-up from other institutional investors, pushed Bitcoin's market value to exceed the one trillion dollar mark.

At the same time, a technology company raised $1.05 billion in funding again by issuing convertible bonds, planning to continue increasing its holdings of Bitcoin. The company has accumulated over 70,000 coins since last year.

This investment enthusiasm reflects institutional recognition of Bitcoin as a hedge against inflation. Not only these large-scale buying institutions and wealthy individuals, but the traditional banking sector has also been accelerating its embrace of Crypto Assets in the past two years, paving the way for broader future applications.

This article will outline the current situation of the banking industry and major listed companies integrating into the Crypto Assets industry, which undoubtedly provides a confidence boost for those waiting to get on board.

Banking Industry and Crypto Enterprises: Accelerating Bidirectional Integration

For a long time, regulators have had a major concern about the crypto market: the lack of reliable custody solutions. Many institutions in the crypto industry have struggled to obtain full banking services, which has also become a major factor hindering public companies from allocating crypto assets. However, this situation underwent significant changes in 2020.

According to statistics, 35 banks have currently shown a friendly attitude towards the Crypto Assets industry and have established substantial business relationships with crypto-native enterprises. Among them, 11 are located in the United States, 10 in Switzerland, and the others are mainly distributed across European financial centers such as the United Kingdom, Germany, and Malta. The median assets of these banks amount to $866 million, with a total of 6 banks having assets exceeding $2 billion.

The United States' leading position in the Crypto Assets banking sector not only stems from its long-term exploration of the encryption industry but is also closely related to a series of executive orders issued by the Office of the Comptroller of the Currency (OCC) last year, which facilitated the rapid integration of crypto-native enterprises with traditional banks.

For example, the payment charter launched by the OCC allows some crypto-native enterprises to upgrade their state trust company licenses to national trust bank licenses, which may enable direct access to the Federal Reserve payment system in the future. The OCC has also opened a pathway for the U.S. banking industry to directly custody crypto assets, and even allows banks to potentially use public chains and crypto dollar stablecoins as the infrastructure for payment, clearing, and settlement.

In this context, some large technology payment companies have begun to seek acquisitions of Crypto Assets custody institutions, while the listing process of a well-known Crypto Assets exchange has also clearly accelerated, with its valuation in the Nasdaq private equity market reaching 100 billion dollars.

Many banking giants have already entered the market or expressed a positive attitude. According to reports, a large investment bank has provided banking services to several licensed exchanges in the United States. The bank's co-president recently stated that they will ultimately have to launch Bitcoin-related services.

One of the world's largest custodial banks has announced that it will launch a new digital currency custody division in 2021 to assist users in trading digital assets, including Crypto Assets.

Switzerland, as another hub for crypto-friendly banks, has even taken open measures earlier than the United States. In 2019, the Swiss Financial Market Supervisory Authority (FINMA) allowed qualified crypto enterprises to apply for banking licenses and approved several traditional large banks to conduct Crypto Assets custody services, while issuing licenses to banks based on encryption asset businesses.

In Asia, a major bank in Singapore has taken the lead in launching an integrated platform for the issuance, trading, and custody of digital assets, supporting exchange services between various mainstream Crypto Assets and fiat currencies.

Bitcoin becomes a standard for listed companies, institutional investors accelerate get on board.

The ongoing integration of traditional large banks and encryption banks has provided the foundational conditions for enterprises to allocate Crypto Assets, while numerous listed companies purchasing Bitcoin has provided a demonstration effect for this trend.

According to statistics, 19 North American/European listed companies have currently allocated Bitcoin. In addition, some large Crypto Assets investment funds are also managing a substantial amount of Bitcoin. The total amount of Bitcoin held by these two types of institutions reaches 948,720 coins, accounting for approximately 4.747% of the total Bitcoin supply.

It is worth noting that the business of a well-known Crypto Assets investment fund experienced explosive growth in 2020, with assets under management (AUM) increasing nearly 50 times, reaching $43.626 billion as of February 20, 2021.

The market expects that there will be more similar fund competitors in 2021. The long-unapproved Bitcoin ETF in the United States is also likely to be launched this year and may adopt more competitive management fee rates.

For example, a newly launched Bitcoin trust has an annual management fee rate of only 1.75%, lower than that of a well-known fund. Recently, two Bitcoin ETFs have started trading in Canada, with the first ETF having a single-day trading volume of $165 million, attracting the attention of international investors, including those from China.

For listed institutions, they will have richer Bitcoin configurations and arbitrage tools and channels. Participating in Bitcoin investments through fully compliant securities markets may become a more prudent choice for listed institutions.