Bitcoin surprised the markets again, closing above $100,000 for 30 straight days. Increasing institutional adoption is fueling this general geographic expansion. On top of that, regulatory clarity and the recently announced approval of spot Exchange Traded Funds (ETFs) are powering the momentum. As Bitcoin’s dominance in the crypto market soars. At the same time, the United Kingdom has been moving ahead with its own plans to cement itself as a leading jurisdiction in the increasingly competitive global crypto space.
Gregory Mall, Chief Investment Officer at Lionsoul Global features the bullish Bitcoin rally and what it means for altcoins. Meanwhile, Canadian banks and pension funds are increasingly engaging with Bitcoin, signaling a shift in institutional investment strategies. Kevin Tam, in his debut “Ask an Expert” segment, unpacks crypto trends and looks at 13-F filings. He dives into what institutional adoption means for the larger picture.
Bitcoin's Dominance and Market Dynamics
Bitcoin’s share of the total cryptocurrency market has skyrocketed above 54%. That’s a dramatic increase from about 38% only a year ago, in late 2022. This recent growth further cements Bitcoin’s dominance over the rest of the cryptocurrency market and its power on the entire space. The new concentration illustrates a flight to quality in which investors gravitate toward those names that promise greater stability and proven value amid the market tumult.
Usually whenever Bitcoin’s dominance does shoot up there are negative effects for altcoins. As Gregory Mall of Lionsoul Global recalled, in the past, the rallies of bitcoin set the tone for the performance of altcoins. Other altcoins will pump as Bitcoin pumps, riding the bullish market sentiment wave and launching new technology prospects. At the same time, some fall behind because of extensive project pipeline.
Yet even with Bitcoin’s strong rally, other large-cap cryptocurrencies have not recovered to their all-time highs. Bitcoin and ethereum values have dropped considerably since their past all-time highs. It’s the same picture with Solana, which is already down over 30%-plus from its own former all-time highs. This sharp performance difference highlights the distinct nature of the crypto market ecosystem. That’s because individual assets react in varying ways to short-term market forces and investor sentiment.
Institutional Investment in Bitcoin
Throughout 2023, we’ve seen increasing signs that institutional adoption of Bitcoin is accelerating at an unprecedented pace. A few things are fueling this continued spike. Leading the charge are greater regulatory clarity, the launch of spot ETFs and increasing acceptance of Bitcoin as a strategic asset. As institutions become more comfortable with the regulatory environment and see the potential for long-term gains, their investment in Bitcoin is expected to continue growing.
Canadian financial institutions are leading the charge on this front. Now, Schedule 1 banks in Canada are custodians for more than $137 million worth of Bitcoin exchange-traded funds. Plus, a Canadian pension fund just allocated $55 million into spot Bitcoin ETFs to its public equity portfolio. To many observers, these investments have been a vote of confidence on Bitcoin’s long-term value and its increasing place in diversified investment strategies.
The effect of institutional investment is highly visible in the supply and demand balance of BTC. Since their announcements, these Bitcoin ETFs have together bought nearly 500,000 Bitcoins. By comparison, the Bitcoin network has created only 164,250 new Bitcoins. In practice, this meant that through its proof-of-work consensus mechanism, this production transpired during the same timeframe. This persistent supply-demand imbalance provides an additional tailwind for Bitcoin’s long term price appreciation.
UK's Crypto Ambitions and DeFi Recovery
Across the Atlantic, the United Kingdom is currently positioning itself to become a leader in the emerging global cryptocurrency market. The UK government is relentlessly focused on driving economic growth. This enables his administration to attract digital assets companies through a friendly regulatory environment. This can-do approach is designed to lure crypto-related businesses and investment. It serves to bolster the UK’s international competitiveness as a hub for innovation within the digital assets space.
The UK’s approach is to focus on creating clear, understandable, and proportionate regulations that offer legal clarity to crypto firms. The UK is just as interested in attracting companies from across the union and beyond. It hopes to accomplish this in part by offering a stable and predictable regulatory framework. As part of their innovation agenda, this initiative seeks to tap into the power of digital assets. It will supercharge both our economic recovery and innovation.
On the other side of the crypto market, Decentralized Finance (DeFi) protocols have recovered nicely. At the time of writing, total value locked (TVL) in DeFi protocols has surpassed $117 billion. This signals an impressive rebound from the market crash we saw in early April. This recovery reflects the resurgence of confidence in DeFi platforms and more specifically their potential to continue disrupting traditional financial systems.
