Digital Assets: MassMutual’s Bitcoin Deal Could Trigger $600B Institutional Demand (JPMorgan)
MassMutual’s $100 million bitcoin buy is “a milestone” in institutional adoption of the cryptocurrency.
A note from analysts at JPMorgan (NYSE: JPM) released Friday said that “adoption of bitcoin was spreading from family offices and wealthy investors to insurance firms and pension funds.” In evidence, the note cited the recent investment by MassMutual in bitcoin worth $ 100 million. (Bitcoin.com)
“One can see the potential demand that could arise over the coming years as other insurance companies and pension funds follow MassMutual’s example,” the analysts wrote.
JPMorgan: Regulatory hurdles
The analysts explained that institutions such as insurance companies and pension funds were restricted by regulatory provisions relating to “risk levels and liability mismatches.”
However, though unbridled investment by institutions was ruled out, the bitcoin market could gain a huge boost if they invested even just 1% of their portfolios in the cryptocurrency.
Given that bitcoin has starkly outperformed most other asset classes this year, the JPMorgan analysts said that “if pension funds and insurance companies in the US, euro area, UK and Japan allocate 1% of assets to bitcoin, that would result in additional bitcoin demand of $ 600 billion.”
Institutional investments in bitcoin are surging
The JPMorgan analysts may be on point.
A Reuters report last week said that institutional investors pumped in $ 429 million into cryptocurrency funds and products for the week ended December 7. This was the second-highest inflow on record and led to an all-time high in institutional holdings of $ 15 billion.
Reuters cited data from CoinShares.
“On an anecdotal level, based on our client conversations over the course of 2020, we have seen a decisive shift from inquiries of a speculative nature to those that begin with comments such as, ‘bitcoin is here to stay, please help us understand it’,” said James Butterfill, investment strategist at CoinShares. “Given the levels of interest, this suggests we are only on the cusp of institutional adoption rather than it cooling down.”
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