Institutions are now driving crypto adoption
76,000 transaction messages per second.
That translates into $11.3 trillion in total dollar volume across 61 million merchants in more than two hundred countries.
That’s what VISA brings to crypto by allowing settlement in the USDC stablecoin.
This is what Geoffrey Moore’s crossing the chasm looks like. Crypto is moving from the earliest enthusiasts to the mainstream.
But to do this, a lot of groundwork had to be done.
All kinds of infrastructure had to be developed to get here. Crypto enthusiasts and diehards built, experimented and gathered communities. It took open-source code, hard and soft forks and lots of risk-taking.
As various blockchain and crypto mining companies listed, they helped educate regulators.
Institutions have done much more than allocate capital for capital gains.
They invested in products, services and infrastructure.
They worked with regulators.
They invested their credibility.
Now VISA is utilizing its powerful network to take crypto to the mainstream.
A changing institutional crypto narrative
The narrative back in 2018 was, what if every institution allocated 1% of their holdings to Bitcoin?
At the time, the vision of institutional involvement focused myopically on price increases. The emphasis on capital gains was understandable, especially if you were a hodler. And it was a fantastic selling point.
But that focused on a small part of what institutions could do for crypto.
Institutional adoption has indeed created spectacular capital gains. Crypto’s current $2 trillion market cap is a direct result of institutional involvement.
However, there was also another part that enthusiasts weren’t thinking about.
Institutions committed capital and investment to crypto. Their investment accelerated institutional adoption of the cryptosphere.
And, as institutions adopt crypto, they further legitimize it to politicians, regulators and the public.
Institutions are investing and building on the crypto foundation
Remember when Fidelity announced they were doing a custody solution for crypto? The Massachusetts based firm was committed to developing crypto infrastructure. They were a leader in the space.
Then there was the 123-year-old legacy of the CME Group that launched Bitcoin futures and options. They’ve recently added Ethereum futures.
The Intercontinental Exchange (ICE), owner of the NYSE, founded Bakkt. They listed Bitcoin futures and options added custody solutions.
Bitcoin futures and options on futures provided traditional fund managers with something familiar and something new. The backing of these old name financial institutions gave them credibility. And with cash-settled contracts, institutions were able to start experimenting.
There were also a couple of important financial products created. One was the first Bitcoin fund by 3iQ in Canada. The other was Grayscale with their suite of funds. These firms increased access to Bitcoin so institutions could gain exposure.
Together these crypto products helped with crypto price discovery.
Crypto insurance products started to appear through old-line firms. This eliminated yet another barrier to entry.
But it wasn’t just old-school firms that helped provide the foundation for institutional adoption. Several newer crypto-focused institutions filled other key gaps.
New school institutions are critical to institutional crypto adoption
VCs were at the forefront of financing numerous projects, including crypto exchanges. Like Netscape with the internet, crypto exchanges like Coinbase have provided an essential gateway to the cryptosphere.
Gemini and others followed Fidelity. They built custody solutions and provided insurance.
Banking for crypto firms was hard to come by. Silvergate took the lead by providing banking for crypto companies.
Various firms developed prime brokerage desks like those in traditional finance to serve institutional demand.
Blockchain analysis and research firms like Chainalysis became an essential service.
Crypto miners like Bitfarms and Hut8 went public. They helped to educate regulators as they listed their operations on stock exchanges.
Firms like Toronto’s Exponential started exploring digitized asset-backed crypto products. Their focus is on applying crypto technology to physical assets.
Many other relatively new institutions joined their old school brethren in setting the stage.
Crypto regulation benefits from familiarity
Regulators are often criticized for moving too slowly. They have had to learn about something highly technical from technically oriented people.
The education process for regulators has been assisted by savvy management teams and financial professionals. Every publicly listed crypto-related company accelerates their insight and knowledge base.
This includes firms like Novogratz’s Galaxy Digital, as well as crypto mining and blockchain firms.
By borrowing product concepts from traditional finance, crypto creates valuable reference points for regulators. While regulation has been slow to catch up, the crypto movement has not been stifled. They have tacitly allowed a parallel financial system room to grow and develop.
The OSC in Canada has been forward-thinking in their approval of various crypto funds. In the US, the OCC has provided federally regulated financial institutions with approval for crypto custody solutions.
And there are more changes anticipated from regulators around the world as crypto continues to grow.
The new crypto frontier
When Michael Saylor announced his investment in Bitcoin, it was a watershed moment. Others grabbed a stake, but he gorged on BTC with several dollar cost average trades. MicroStrategy’s stock has become, in a sense, the first BTC listed fund in the US.
PayPal and some others followed with their announcements. Elon Musk didn’t want to be left out of the party. So he picked up a billion or so on behalf of Tesla.
These announcements have been followed by a form of game theory for other institutions. Strategic public announcements and some actual investments in crypto by several institutions have followed.
This marked the all clear for various members of the investment community.
Old-line insurance firms bought stakes in BTC. Insurance firms are some of the most conservative risk-averse companies around. So this could be considered a strong endorsement of the future of Bitcoin and the crypto architecture.
The investment banks have noticed as well. Goldman, JP Morgan and Morgan Stanley are adding crypto advisory services for clients.
Recently financial behemoth State Street and Liberty Mutual have made significant crypto announcements.
PayPal will now let you pay with crypto in a closed crypto ecosystem.
But it will be VISA that brings crypto to the widest swath of people and businesses. They announced that transactions can now be settled in USDC. Through USDC settlement, VISA integrates crypto with their 3.5 billion cards and 61 million merchants across the world.
The institutions are taking crypto to the people
The current crypto environment involves more than 9,000 ongoing experiments. They are in the form of tokens, altcoins, stablecoins and many different DeFi elements. There are thousands more that have been tested and failed.
Crypto was referred to as a scam by JP Morgan’s Jamie Dimon. Now his firm provides banking, advice and research. Peter Schiff, the eminent doom and gloomer, has finally capitulated on his erroneous Bitcoin predictions.
Companies have realized that they can diversify their company asset mix using digital money and infrastructure.
And as old school companies take stakes in Bitcoin, they are providing an endorsement of the technology.
VISA settling in stablecoins like USDC will be like the last mile of cable into our homes. Now everyday people are a big step closer to being a part of crypto. They will be able to use the technology without being intimidated by it.
That means that the development of the token economy, DeFi and numerous other innovations is closer to broad adoption. This was the dream back in 2017. And look how fast it seemed to arrive.
In March 2020, when the world faltered and the markets fell apart, people wondered about the future of crypto.
Would it survive?
Could it come back?
Or would it disappoint once again?
The institutions are here. The infrastructure is building out rapidly.
And the people crypto was designed to serve, are one step closer to the future of money.
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