Bitcoin Rally Could See Further Support As Institutional Investors Face FOMO, Analyst Says

Bitcoin's (BTC) massive rally in the recent months could see further support as institutional investors battle with FOMO, or the "fear of missing out," according to PwC’s Hong Kong-based Global Crypto Leader Henri Arslanian.

What Happened: Bitcoin has been on a rally since July, even though the momentum is staggered in the $19,000 levels of late. While many draw correlations between Bitcoin’s four-fold growth from March lows and the pandemic fueled market rally, others see the cryptocurrency as an alternative asset to gold.

In 2017, Bitcoin peaked at $20,000 post, which led to a free-fall. The rally then was primarily fueled by a retail-investor frenzy.

According to Bloomberg, JPMorgan analysts see Grayscale Bitcoin Investment Trust GBTC as a window for institutional investments in Bitcoin, which will push the demand for the apex cryptocurrency beyond retail purchases by millennials.

“The multitude of regulated crypto exchanges and custodians has eliminated the career risk for institutional investors. In 2017, there was retail FOMO," Arslanian said in an interview. "The question is whether we will see institutional FOMO in 2021.”

Why It Matters: Traditional banks have trailed fintech firms in terms of growth and embracing new technologies.

Fintech firms’ foray in cryptocurrency — like Microstrategy Incorporated (NASDAQ: MSTR) buying another $50 million worth of Bitcoin, Jack Dorsey-led Square Inc’s (NYSE: SQ) $50 million investment in Bitcoin and its offerings through Cash App, or Paypal Holdings Inc’s PYPL allowing users to buy, hold, or sell cryptocurrency — suggest that the new-age companies are prepared for a change in financial dynamics if that happens.

JPMorgan Chase & Co. JPM, which has publicly criticized the volatile nature of Bitcoin earlier, launched its own virtual currency this year.

Graysscale's Bitcoin and Ethereum trusts saw record average daily trading volume in November, as its Bitcoin assets increased five-fold from $2 billion in December last year to $10 billion today. As per Bloomberg, hedge funds accounted for 81% of the money coming in.

“Institutional investors are keen on portfolio construction in the wake of COVID-19, and the ways they need to reposition themselves given how governments have injected stimulus into the system,” Michael Sonnenshein, managing director of Grayscale Investments, said.

Arslanian expects increased pressure on asset managers to consider Bitcoin as part of portfolio construction as investors become comfortable with it.

Price Action: GBTC closed 3.25% lower at $23.22 on Friday, and ETHE closed 3.48% lower at $122.05.

See Also: 8 Stocks To Play Bitcoin's Resurgence