Institutional impact on cryptocurrencies seems to have become relevant in the current context. While it’s considered speculative, experts believe that certain corporations can affect the value of cryptocurrencies. On August 17, 2023, a report unveiled by The Wall Street Journal (WSJ), an international publication, stated that SpaceX, a spacecraft engineering company run by Elon Musk, sold off its roughly $373 million worth Bitcoin (BTC) holdings during 2021-22.
From what it’s understood, post the development, BTC sustained a close to 10% downfall in price. According to CoinMarketCap, a crypto price-tracking website, BTC began trading around the $26,000 value. Reportedly, cryptocurrency Ether (ETH) also witnessed a fall in price, and was trading at the $1,685 mark. “I believe given Bitcoin’s position covering nearly 50% of the cryptocurrency market, this write-off cascaded into a sell-off across all cryptos. Consequently, traders found themselves compelled to offload their cryptocurrencies at a loss, to avoid losses following this event,” Edul Patel, co-founder and CEO, Mudrex, a crypto-investing platform, told FE TransformX. As of August 22, 2023 (12.52 pm, Indian Standard Time), BTC is trading close to the $26,100 mark, along with a nearly $508 billion worth market capitalisation, while ETH is close to the $1,670 mark, having a market capitalisation of around $200 billion.
Going by market reports, liquidations worth over one billion dollar valued digital coins happened after the news broke out. According to LinkedIn, a social media platform, market factors such as the international sell-off in stock markets and United States’ interest hikes assisted in BTC’s falling value. Furthermore, the platform highlighted that presence of institutional investors could result in this update triggering extra selling demands in the cryptocurrency space. “I think the Bitcoin crash had a domino effect on the crypto market. Large-cap cryptos fell by more than 10%, while mid- and small-cap caps experienced losses of 20% or more. The downturn could continue, especially if the market remains below certain indicators,” Rajagopal Menon, vice-president, WazirX, a cryptocurrency exchange, said.
It’s believed that the development has asked questions on whether cryptocurrencies should be considered as an investment class. TS2 Space, a telecommunications company, has accredited reasons, such as US Securities and Exchange Commission’s (SEC) supervision of XRP token, monetary scepticism, and regulatory drawbacks, towards investors’ inability to handle the cryptocurrency space.
However, arguments have also been laid that Bitcoin’s institutionalisation can drive cryptocurrencies’ mainstream adoption. As per Finance Magnates, an online trading knowledge hub, with more institutions’ entrance into the cryptocurrency sector, Bitcoin can be driven towards approval for transactions. The hub has also pointed out that concerns, on account of Bitcoin’s institutionalisation, include enhancement of market manipulative practices due to the presence of institutional investors. Based on how things stand, it’s yet to be understood whether institutionalisation and decentralisation of cryptocurrencies correlate at the same point or not.
“Investors should keep doing their diligence and research, and keep investing and HODLing BTC and other cryptocurrencies. Investing and holding crypto long-term, while keeping faith in the potential of crypto becoming a paradigm in finance and beyond, is what crypto investors should continue to do,” Kumar Gaurav, founder and CEO, Cashaa, a blockchain company, concluded.
