Big players still fear Bitcoin’s volatility as well as its previous association with criminal activities.
Although many large players bought large quantities of Bitcoin (BTC) in 2020, according to Robert Li, an analyst for the Draper Dragon fund (part of the Draper Venture Network), many aspects still prevent institutions from investing on a large scale.
During a segment of the Latin America Bitcoin Conference on Tuesday, Li said:
„I think there are still some aspects that prevent most institutional investors from freely allocating their capital to Bitcoin.
The main obstacle is the reputation problems resulting from Bitcoin’s previous association with crime, terrorism and online drug sales. I think that in the past years many people have not thought twice about simply liquidating Bitcoin as a scam“.
Silk Road, a former black market online, was a prime example of illegal activity facilitated by Bitcoin transactions. But Li believes that today the ecosystem is very different, thanks to the action of governments and the help of analysis companies.
In 2020 Bitcoin has increasingly become a legitimate investment in the mainstream world. PayPal recently added Bitcoin and other cryptos to its platform, while traditional financial companies such as MicroStrategy have begun buying significant amounts of BTC. However, we have not yet seen the peak of mainstream interest: Bitcoin’s reputation may not be the only thing that intimidates large financial institutions.
According to Li, regulation also seems to be an obstacle, although the laws are region-specific:
„In many ways the crypto regulation here in the US is not at all mature. […]
The spot crypto exchanges in the US are not regulated in the same way as national stock exchanges such as the NYSE or the NASDAQ. As you can imagine, they are not even required to meet the same kind of investor protection standards“.
He mentioned that big players are also wary of another vulnus in the Bitcoin investment world, namely market manipulation: in his opinion this would be a well-founded fear, considering that in the past significant price fluctuations have resulted from poorly regulated exchanges. Volatility could also frighten new institutional Bitcoiners, as well as a „wide lack of institutional services and tools“ for such actors, even if this aspect has improved in recent years.
Leading the early adopters is MicroStrategy, which has recently expressed interest in buying even more BTC.