On-Chain Metrics Suggest That Bitcoin Is Ripe for Institutional Adoption


With Bitcoin becoming increasingly accepted as a diversification asset, this could just be the beginning and a new wave of institutional adoption could be just around the corner.

April 7, 2021 | AtoZ Markets – 2021 was an incredible year for cryptocurrency growth. Just yesterday, the total market cap of all cryptocurrencies surpassed $2 trillion for the first time, having only reached $1 trillion three months ago in January.

Bitcoin is by far the largest contributor, with a market of $1.1 trillion. In addition, it now has the achievement of trading with a market capitalization of more than $1 trillion for an entire week and will continue to do so as long as prices remain above $53,566.

Regarding the possibility of continuing to support these levels, data from Glassnode shows that the volume of transactions has increased in line with the price, thus suggesting that Bitcoin’s bull market performance is justified. In fact, 10.6% of the current supply (1.98 million BTC) was traded above the $1 trillion thresholds, forming one of the strongest levels of on-chain support considering that prices of Bitcoins ranged between $11,000 and $12,000.

Another promising indicator is that Bitcoin looks less erratic than it used to be. Last week, it was traded within a relatively tight range of 5.4%, while its volatility shown in six months stabilized at around 73%, according to a report from Bloomberg.

This is relevant as although Bitcoin’s impressive gains have affected many institutional investors, most have so far been reluctant to take the risk of an asset that can rise or fall by up to 30% in a single day.

Then there is also the question of Bitcoin’s correlation with other assets. A quarterly report from Coindesk Research recently showed that there has been a decrease in recent months in reference to Bitcoin’s correlation with gold, the US dollar, and the S&P 500.

These are assets that many traditional investors already have, and adding a less correlated asset reduces the volatility of their overall portfolio. This is known as correlation diversification and is a popular mechanism for portfolio protection in traditional markets.

All of these factors are a good sign for financial institutions and could soon further drive Bitcoin adoption. In fact, Morgan Stanley recently announced that it will provide a number of mutual funds with exposure to Bitcoin. Goldman Sachs is also close to offering Bitcoin investments to its wealth management clients.

With Bitcoin becoming increasingly accepted as a diversification asset, this could just be the beginning and a new wave of institutional adoption could be just around the corner.

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