A recent report from PwC indicates that institutional funds flowing into the cryptocurrency ecosystem reduced massively in 2019.
It’s no secret that institutional money has been on the sidelines waiting for the perfect time to wade into cryptocurrencies. PwC’s report suggests that this time has not come yet because even with BTC’s rally to $13K in June last year, institutional money was still not convinced.
Crypto Failed To Attract Institutional Investors In 2019 Despite Bitcoin’s Stellar Run
Institutional players have long been touted as a key ingredient in the recipe for crypto’s mainstream adoption. However, these investors are somewhat cautious to explore the unchartered world of cryptocurrencies due to the high volatility.
According to PwC, the number and value of crypto-affiliated fund-raising and mergers and acquisitions plummeted in 2019. The value of mergers and acquisitions in the crypto industry declined by over 75% from around $1.9 billion in 2018 to a mere $451 million last year.
The amount of raised funds in 2019 also dropped 40% to $2.24 billion from $3.72 billion the previous year.
This basically means that mainstream institutional money did not flow as much into crypto despite the top cryptocurrency recording new highs last year. The report astutely stated:
“The rise in the price of bitcoin in q2 and Q3 2019, and the associated interest in crypto assets did not yet materialize by way of increased new capital into the industry.”
The Crypto Industry Is ‘Not Immune’ To Coronavirus
Another key takeaway from PwC’s report is that the crypto market will not be spared from the volatility associated with COVID-19.
To say that coronavirus pandemic has impaired the global economy would be a gross understatement. The virus has now infected more than one million people worldwide and has also led to the shut down of many startups and investment firms all over the world.
PwCs global crypto leader, Henri Arslanian averred that the cryptocurrency industry “is not immune to the global headwinds” and there is a high chance institutional fund flows to crypto will be affected this year as well.
It’s Not All Doom And Gloom For The Crypto Industry
The steady decline of institutional money inflows to crypto is not all that alarming. Crypto firms get most of their funding from traditional and crypto-centric venture capital funds, family offices and incubators. PwC expects more mainstream investment into crypto firms from APAC (Asian Pacific countries) and EMEA (Europe, Middle East, and African countries) amid the global market turmoil.
Also, some crypto pundits argue that institutional investors are not even necessary for the success of the cryptocurrency industry. In fact, some say that the entry of institutional money into crypto could lead to further domination of the banking class which was not part of Satoshi’s vision.
As the coronavirus spreads, governments have embarked on rate cuts and money printing sprees in an effort to bolster the collapsing economy. Flooding the markets with money will have unwelcome consequences in the long-term.
Bitcoin provides a hedge against inflation spurred by infinite money printing. It is, therefore, poised to benefit as more and more people realize the value of an asset that does not depend on government intervention to thrive.