Staking and DeFi Could Push Institutional Crypto Adoption in 2020
Institutional investment was one of the top talking points for the crypto space in 2020. It was quite understandable, with companies looking to stay positive on their balance sheets and make gains with Bitcoin.
There are pockets of the crypto space that believe the increase in institutional investment was what helped Bitcoin break its previous all-time high. It is quite understandable, considering that most institutions tend to put huge money into Bitcoin when they come in.
A Great Year in 2020
The poster child for institutional investment in crypto was MicroStrategy, a business intelligence firm based out of Virginia. In August, MicroStrategy announced that it was moving its balance sheet to the Bitcoin standard, converting $250 million in its reserves to the leading cryptocurrency. At the time, Bitcoin traded at around $10,000, making the move a pretty smart one.
A few days later, the company doubled down and added a further $175 million in investments. That brought its entire haul to $425 million, making MicroStrategy one of the largest institutional Bitcoin investors.
The company has continued with its spree. Following Bitcoin’s surge past the $40,000 mark last month, the Virginia-based firm announced that it had raised $650 million in capital by issuing convertible senior notes. As the company announcement noted, it planned to sue most of the capital to purchase Bitcoin again.
It is unclear how much Bitcoin MicroStrategy has committed. Michael Saylor, the company’s chief executive, told Elon Musk on Twitter last month that they had over $1.3 billion in commitments to the leading cryptocurrency.
Such is the state of play. Companies are pushing into Bitcoin significantly, and the industry is doing pretty well because of it. In October, blockchain research firm Coin98 Analytics showed in an infographic that public companies had committed a total of $6 billion to cryptocurrencies.
Still, the investments kept coming. Last month, the Wall Street Journal reported that MassMutual, one of the United State’s top insurance firms, had purchased $100 million in Bitcoin. According to the report, the Massachusetts-based firm made the purchase through NYDIG, a New York fund management company that focuses on digital assets.
Asides from the purchase, MassMutual also acquired a minority stake in NYDIG for $5 million. NYDIG has a crypto portfolio worth a reported $2.3 billion, and it will provide effective custody for MassMutual’s Bitcoin holdings.
There are stories about all these purchases for days.
The Economy Pushed Investors Away
It’s worth understanding why institutional investment is coming at this time. Thanks to the coronavirus pandemic, companies have come to understand that the economy isn’t so strong. The Federal Reserve has been on a money printing spree, and Congress is set to go through another round of stimulus checks to provide relief for people.
While the relief for citizens is great, there is the effect that monetary policy like this will have on the entire economy. With the dollar proliferating and national debt going through the roof, the American economy is in a bit of a quandary and could falter. So, companies are looking into alternative assets that can provide the bet returns.
Bitcoin was the best-performing investment asset of the last decade, so naturally, it will be the top choice for investors. Thus, we find ourselves where we are today.
How Fares 2021?
With the focus on institutions going strong, it is worth examining whether this gravy train will continue. So far, it seems too early to say whether this will be the case. However, early signs aren’t so encouraging.
Last week, British crypto fund manager CoinShares published its Digital Asset Fund Flows report, claiming that institutional inflows had dropped by almost 97 percent. Numbers showed that the first week of trading in 2021 saw just $29 million in institutional flows – as opposed to $1.09 billion in the week before Christmas.
CoinSahres believed that the volumes had dropped because of profit-taking from investors. It pointed to the outflows from several investment funds and products as a reason for this.
CoinShares estimated that as of January 8, $34.4 billion in capital was held in crypto investment products. Of that number, $27.5 billion, or 80%, was in locked BTC funds. At the same time, $4.7 billion, about 13.5%, was invested in ETH products.
The report also noted stronger performance in Bitcoin funds recently – much better than the previous bull run.
So, things are a tad mixed at the moment. Still, there is hope for better results. For one, the decentralized finance (DeFi) space is still as vibrant as ever. Total value locked has finally crossed the $20 billion mark, and new developments from some top DeFi protocols should bring about further growth in the industry.
Along with DeFi, there also appears to have been a considerable interest in staking. Some investors are gearing up for the launch of Nimbus, a marketplace for decentralized apps (dApps) that will allow users to generate multiple revenue streams based on real-world investments like IPOs - but in a decentralized manner.
All in all, Nimbus gives more than 10 different earning strategies for their users in one platform. With use cases in IPO investment, Startup Financing, Peer-to-Peer loans and other options, the average user of Nimbus gets an opportunity to diversify their investments and earn with their crypto. All of their dApps are managed by the DAO, with Nimbus taking only 10 percent of its native governance tokens.
Nimbus is an established fintech company that is now launching a holistic DeFi platform serving as a bridge between the traditional financial system and DeFi. The company has been around since 2019 and has grown significantly since then to record a user base around 50,000.
Nimbus is launching a native token, NBU, on 27 January 2021. It provides access to all of these revenue-generation tools. With the Nimbus Governance token that shall be launched later this winter, users can also go about governing the platform, its technical development, dApps profitability levels etc and also earn their shares of Platform revenues.
Investors might turn their eye to the DeFi space, finally allowing it to compete with the mainstream crypto industry.
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