James Butterfill says companies used to treat him like a dirty secret.
As CoinShares’ head of research, one of his jobs is to meet prospective institutional investors and try to convince them to trust the asset management firm to invest their money into cryptocurrencies.
Five years ago, that was a tall order.
“We would generally meet them in the corner of some coffee shop because they were worried about the image it would portray of them meeting some crypto guys,” Butterfill told DL News.
But things have changed.
“Now we’re being invited into the boardrooms,” he said.
The shift marks a dramatic change in institutional investors’ attitude towards digital assets. In the past, they often viewed Bitcoin and altcoins with scepticism, as speculative assets that only hedge funds and family offices with huge risk appetites dared to touch.
Now, pension funds and university superannuation funds are pouring capital into Bitcoin exchange-traded funds and digital asset treasuries to get exposure to cryptoassets.
They’re expected to pile up to $13 trillion into Bitcoin investments alone by 2030, according to Ark Invest, an ETF provider.
Their bullishness comes at a peculiar time for the crypto industry.
On the one hand, the industry has never had more governmental support. On the other, it has lost almost half of its market value since October, and uncertainties surrounding the war in the Middle East threaten to exacerbate market jitters.
Even so, most of the firms DL News spoke to that provide crypto investment services to institutional investors remain optimistic — the market, they say, will bounce back soon.
“Believe it or not, most institutional investors have still not allocated to crypto,” Zach Pandl, head of research at Grayscale, told DL News. “They therefore tend to see drawdowns as an opportunity to build positions at compelling prices.”
The turn
US President Donald Trump is a key driver behind the changing attitude among institutional investors.
“Regardless what you think about Trump, he’s done a lot of things to the asset class,” Butterfill said.
Since taking office, Trump has appointed crypto supporters to key government roles, signed executive orders to create a national Bitcoin reserve and banned the creation of a central bank-issued digital dollar.
He has also pardoned industry leaders, signed a landmark stablecoin bill into law, and backed the Clarity Act, a bill designed to clarify the rules the industry must adhere to.
More importantly, his policies, and the appointment of Paul Atkins to lead the Securities and Exchange Commission, have effectively halted the tougher policing of the Joe Biden years.
In its place, Atkins, and his counterpart at the Commodity Futures Trading Commission Michael Selig, have introduced regulatory guidelines that the industry could only dream of a few years ago.
“All of that has just improved the legitimacy of the asset class,” Butterfill said.
To be sure, these firms have reason to talk up the shifting attitudes towards the industry — their business models depend on the idea that more people will invest in cryptocurrencies.
That being said, Wall Street is positioning itself to capitalise on what they see as a wave of interest in blockchain-backed investments.
This week, banking giant Morgan Stanley launched a Bitcoin ETF to compete with the ones of investment giants BlackRock and Fidelity, and US mortgage-finance giant Fannie Mae is said to soon accept crypto-backed mortgages.
Elsewhere, JPMorgan, led by it’s perennial Bitcoin sceptic CEO Jamie Dimon, has started to allow institutional clients to pledge their crypto holdings to secure loans.
The October crash
Two major factors still demand vigilance among investors: the $19 billion market implosion in October, and uncertainties caused by the war in Iran.
That’s triggered renewed concerns from investors about digital assets’ ties to crime, volatility, computing risks and crypto’s impact on the environment.
Despite the downturn following the joint US and Israeli attack on Iran, Bitcoin has performed better than equities and gold.
Investment managers tell DL News that this fact has incentivised institutional investors to bet on the asset class — especially as they expect things to get better soon.
Whales are to blame for the downturn, Butterfill argues. Many individuals who own over 10,000 Bitcoin believe that the cryptocurrency’s price adheres to a four-year cycle.
This cycle starts at every halving, an event where the reward for mining Bitcoin drops by half. This usually sets the stage for a massive rally that culminates about 18 months later. Then the price starts to drop, and won’t rise again until the next rally.
“I would argue that that’s nonsense because the supply is perfectly known for the next 100 years,” Butterfill said.
Even so, whales that adhere to the idea of the four-year cycle started to take profit in October, he said.
The good news?
“That’s slowing right down, which is quite encouraging,” Butterfill said, predicting that the selling will end in April and pave the way for Bitcoin’s price to start its climb back above $80,000.
Bitcoin ETFs’ $2.3 billion haul
Since February 23, investors have injected over $2.3 billion into Bitcoin ETFs, marking four solid weeks of inflows into those funds, according to DefiLlama data.
“That’s quite encouraging,” Butterfill said.
While that doesn’t offset the $1.6 billion pulled out of these funds since October, Bitcoin ETFs still hold over $83 billion worth of Bitcoin.
“Crypto ETF demand has been remarkably sticky,” Pandl said.
