Proposing this hypothesis is JPMorgan Chase analyst Nikolaos Panigirtzoglou, who suggested in a recent note that MassMutual’s investment in BTC highlighted the potential for increased institutional demand for bitcoin in the coming years.
According to JPMorgan analysts, bitcoin adoption is spreading not only among family offices and wealthy investors, but also among insurance companies and pension funds.
While they believe it is unlikely that the latter will ever make investments of very large amounts, even small percentage investments could have a significant impact on the price of BTC.
Suffice it to say that the entire market capitalization of Profit Revolution to date is around $350 billion, while the M0 money supply of the U.S. dollar alone is over $5 trillion, while M1 is over $6 trillion, and M2 is over $19 trillion.
Therefore, with market capitalization still so low, a mass of institutional investment, even not particularly large, could have a significant impact on the price of BTC.
MassMutual for example has only invested 0.04% of its total investment account in bitcoin for now, which is still about $100 million. For example, should they decide to increase this investment to 1% they would have to invest another $2.4 billion.
Imagining another dozen similar initiatives would easily reach $25 billion, capable of moving the price of BTC in a decidedly significant way.
Institutional investors will make Bitcoin grow
JPMorgan strategists reveal that in the theoretical scenario where, over the next few years, all pension funds and insurance companies in the US, eurozone, Britain and Japan invested 1% of their assets in bitcoin, this would result in an additional demand for BTC of around $600 billion, or almost double its entire current market capitalization.
Moreover, an increase in demand tends to be reflected in the price of BTC by larger increases, partly because market capitalization is a purely theoretical metric that cannot be compared to market demand. In other words, 600 billion of additional demand would not mean a 600 billion increase in market capitalization, but would most likely generate a much greater increase in market capitalization, and therefore in price.
For now, large institutional investors still face some technical hurdles when it comes to secure investments in bitcoin, but as the case of MassMutual shows for example, solutions to this problem actually already exist.