Institutional interest in Bitcoin is growing, with investment scale surpassing historical highs

Although Bitcoin's price has dropped by 52% from its peak in 2017, institutional investors' investments in it have significantly increased. The main factors currently influencing institutional capital inflow into Bitcoin include the positive attitudes of well-known investors, the maturation of Bitcoin, and the continuously strengthening fundamentals.

The assets under management of the Grayscale Bitcoin Trust, ( AUM ), is often seen as an indicator of institutional investment participation in Bitcoin. As of June 23, 2020, the trust's AUM exceeded $3.5 billion, which is nearly 20% higher than when the Bitcoin price reached an all-time high in 2017.

Notably, the proportion of institutional investors in Grayscale products jumped from 56% in the first half of 2018 to 88% in the first quarter of 2020. This indicates a significant increase in institutional interest in cryptocurrency investment tools.

Recently, the attitude of some major financial institutions towards Bitcoin has also changed. JPMorgan, which once held a critical stance on Bitcoin, recently stated that Bitcoin has "strong momentum" and is providing banking services to cryptocurrency exchanges. Notable investor Paul Tudor Jones has also indicated that he will allocate 1% of his net assets to Bitcoin, recognizing its potential as a hedge against inflation risk.

The continuous maturation of the Bitcoin network has also enhanced the confidence of institutional investors. From June 2019 to June 2020, the Bitcoin network's hash rate grew from 57 million TH/s to 105 million TH/s. Even after the recent halving event, the network's hash rate quickly recovered, demonstrating strong resilience.

Another positive signal is the decrease in Bitcoin reserves at cryptocurrency exchanges, which may indicate a reduction in retail trading activity and an increase in market share for institutional trading platforms. This change could bring about price trends and cycles that differ from the past two years.

However, not all institutions are optimistic about Bitcoin's long-term prospects. Goldman Sachs stated in a client meeting that hedge funds trade cryptocurrencies mainly because of their high volatility, rather than their long-term investment value.

Overall, institutions and high-net-worth investors have differing views on the future development of Bitcoin. Some believe it will become a mature store of value and a reliable safe-haven asset, while others anticipate limited growth potential. For investors, holding long-term may be the strategy to maximize investment returns, provided that there are no significant changes in the fundamentals.