U.S. bank JPMorgan issued a note saying institutional investors could increase demand for bitcoin. Institutional investors are, for example, pension funds, family offices, large companies, and brokers.
A recent operation of Massachusetts Mutual Life Insurance prompted the announcement. Known as MassMutual, the insurance company also offers pension and investment plans. It bought US$ 100 million in bitcoins, signaling bitcoin’s advance among institutional investors, the note said, according to Bloomberg.
“MassMutual’s purchases represent another milestone in the adoption of bitcoin by institutional investors”, JPMorgan analysts said. “One can see the potential demand that could rise in the coming years as other insurance companies and pension funds follow the example of MassMutual”.
Institutional investors face regulations that may limit bitcoin buying
The leading cryptocurrency is experiencing a very positive moment. On December 16, it renewed its price record, reaching US$ 20,500. Price is one factor that makes cryptocurrency mining more expensive and therefore more profitable for miners.
According to JPMorgan analysts, if pension funds and insurance companies in the US, euro zone, UK, and Japan invest 1% of their assets in bitcoin, the additional demand for the digital currency would be US$ 600 billion. To get an idea of the impact, the market capitalization of bitcoin, on the day this report was written, was over US$ 421 billion.
However, this potential will hardly be realised in its entirety. Because these companies are subject to regulatory issues that limit the risks to which they may be exposed. Therefore, explains the bank announcement, this should limit how much they can buy of bitcoin.
MassMutual, however, is not the only one. Global investment giant Guggenheim Partners said it wants a US$ 500 million exposure to bitcoin through the Grayscale Bitcoin Trust (GBTC).
It is worth remembering that other large companies are already getting involved with bitcoin’s universe but in a slightly different way. PayPal, for example, started to allow bitcoin transactions on its platform. With this, it now accounts for almost 70% of purchases of new bitcoins. On the other hand, the CashApp payment service gets about 40%.