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Key Insights on the Increasing Presence of BTC in the Financial Sector

— June 29, 2022

One of the best case studies for Bitcoin and its increasing presence in the financial sector has been its mass adoption by institutional investors.

Cryptocurrency has come a long way since the launch of the most popular coin in 2009. We are talking about Bitcoin, which is the most dominant cryptocurrency out there. Over the past decade, Bitcoin (BTC) went through a lot of ups and downs but also made big leaps forward and got accepted as official means of payment by plenty of online and offline merchants. 

The fact that you can buy Bitcoins from a registered cryptocurrency exchange and then use those Bitcoins to buy other goods made this cryptocurrency an important player in the financial sector. And while everyone thinks that policy will determine the future of Bitcoin, we’ve already seen mass adoption and even greater use of cryptocurrencies in both the online and offline segments.

Many see cryptocurrencies as the future of finance, and the emerging digital currency market is already creating an alternate universe of finance, commerce, investment, and speculation. All of this could profoundly transform the global economy as we know it and disrupt many industries. Bitcoin already reshaped the way people borrow, save, and invest, which is how it has been increasing its presence in the financial sector.

“A vehicle with great prospects”

Cryptocurrencies have been seen as a vehicle with great prospects. They have a massive potential to outperform conventional banking products while offering greater efficiency, better transparency and less bureaucracy. They are safe and private, too – you can save Bitcoin in your cryptocurrency wallet and keep it for years or spend it as you please.

The truth behind this statement was even confirmed by banks – many of them launched a variety of cryptocurrency offerings such as processing payments, facilitating international cash transactions, helping customers exchange their money, and even getting loans in Bitcoin.

The widespread use of Bitcoin has even led banks to mimic coin products and launch their own cryptocurrencies. In that manner, in 2019, JPMorgan Chase introduced JPM Coin, which was used primarily for funds transfers and faster transaction settlements among their clients. More than 100 other banks tested instant payments with the cryptocurrency Ripple and so on…The point is that all of this was facilitated by the popularity of Bitcoin and its foray into the financial sector.

The rise of crypto banks

Nowadays, there are still people who are searching for videos where they would see the purpose of Bitcoin explained in simple words. The number of these people has been growing, all thanks to the rapidly growing crypto finance market and the way it forayed into the traditional banking sector. The fact that people are using cryptocurrency banks to store their Bitcoin is the first big perspective of the increasing presence of Bitcoin in the financial sector.

Bitcoin book, coins, pen; image by David Shares, via
Bitcoin book, coins, pen; image by David Shares, via

Moreover, crypto banking platforms have been luring customers by offering annual percentage yields (APYs), which are of magnitude higher compared to traditional bank accounts. These yields range anywhere from 7% to 12% for Bitcoin and stablecoins, or even more for newer crypto projects which carry higher risks (and therefore offer the highest yields). All of this has driven a lot of investors to the crypto world, attracting mainstream attention as well.

Institutional attention

One of the best case studies for Bitcoin and its increasing presence in the financial sector has been its mass adoption by institutional investors. We have seen so many risk-averse institutions such as universities, retirement funds, insurance firms, and even traditional financial institutions and payment processors entering the cryptocurrency market, giving the public a free Bitcoin advertisement and showing everyone how crypto banking is already broadening its acceptance. 

Even in periods where the Bitcoin price is low, analysts advise that it is the perfect time for even more institutional investors to step in and demonstrate their trust in the flagship cryptocurrency. There are, obviously, many factors for this, from the modern-day war and crisis to the current inflation, which could all result in a bullish price rally for Bitcoin.

Trading tools, cryptocurrencies, and regulated decentralized finance (DeFi) solutions will continue to be among the main drivers of institutional attention. The institutional interest has already driven broader interest in Bitcoin, but issues over custody, security, and capital efficiency are still roadblocks for the major digital asset.

Bitcoin has a continuing momentum

While the prices of Bitcoin are somehow seasonal and tend to go up and down, the press reports also vary from enthusiastic to pessimistic. There is no doubt that Bitcoin is still a speculative investment. However, we can’t deny the continuing momentum in cryptocurrency and how clear it is from the pace of investments by institutional investors, venture capital firms, and private equity funds.

In that manner, we have seen investors and their response to the general professionalization of the cryptocurrency industry. Lastly, the fact that Bitcoin is based on blockchain technology also boosts the overall confidence in the cryptocurrency as an investment vehicle for capital markets.

Final thoughts

Reports from Investopedia show that Bitcoin was once equivalent to 2.9% of the economy. Despite the fact that the cryptocurrency is volatile and often based on speculations, it is undeniably a major financial instrument and a system that is designed in order to secure the creation and transfer of money,

The mainstreaming of Bitcoin has already happened, showing us that the dominant cryptocurrency has massive potential. However, in order for it to spread even more widely, certain technological improvements in the ecosystem are needed. For starters, Bitcoin’s blockchain system should be able to handle millions of transactions in a short span of time for a true revolution to happen. As regulators evolve to keep pace, it is likely that the entire crypto ecosystem will expand.

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