Bitcoin is attracting the attention of savvy investors who are looking for alternative ways to diversify their portfolios and hedge against inflation. These investors, known as smart money, are typically institutional investors and experienced market participants who have access to more information and resources than the average retail investor.
Smart money is piling into bitcoin because they see it as a scarce and valuable asset that can offer high returns and low correlation with other asset classes. We will explore some of the reasons why smart money is bullish on bitcoin and what this means for the future of the cryptocurrency market.
Bitcoin is attracting the attention of sophisticated investors who are looking for alternative assets to diversify their portfolios and hedge against inflation. These investors, known as smart money, are making strategic bets on the future of the cryptocurrency market and its potential to disrupt the traditional financial system.
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Smart money refers to capital investments from institutional investors, such as hedge funds, pension funds, endowments, and sovereign wealth funds, as well as knowledgeable market participants, such as high-net-worth individuals, family offices, and accredited investors. These investors have access to more information, resources, and expertise than the average retail investor, and they often move the market with their large-scale transactions.
According to various sources, smart money is piling into bitcoin in unprecedented amounts. For example, a recent report by Chainalysis, a blockchain analytics firm, revealed that institutional investors purchased over $30 billion worth of bitcoin in 2023, more than triple the amount they bought in 2020. The report also showed that institutional investors accounted for 75% of all bitcoin inflows in 2021, compared to 39% in 2020.
Another indicator of smart money’s interest in bitcoin is the growth of the Grayscale Bitcoin Trust (GBTC), the largest publicly traded bitcoin fund in the world. GBTC allows accredited investors to gain exposure to bitcoin without having to buy, store, or manage the digital asset directly.
As of December 2023, GBTC had over $40 billion in assets under management, representing more than 3% of the total bitcoin supply. The majority of GBTC’s investors are institutional entities, such as hedge funds, asset managers, and family offices.
One of the main reasons why smart money is investing in bitcoin is its scarcity and limited supply. Bitcoin has a fixed cap of 21 million coins, which means that no more than that number can ever be created. This makes bitcoin a deflationary asset that can preserve its value over time, unlike fiat currencies that are subject to inflation and devaluation. Moreover, bitcoin’s supply schedule is predetermined by its algorithm, which reduces the uncertainty and unpredictability that often plague other markets.
Another reason why smart money is bullish on bitcoin is its potential to become a global reserve currency and a store of value. Bitcoin has several advantages over traditional reserve currencies, such as the US dollar and the euro. For instance, bitcoin is decentralized and independent of any central authority or intermediary, which means that it cannot be manipulated or controlled by any government or institution.
Bitcoin is also borderless and universal, which means that it can be used and accepted by anyone, anywhere in the world. Bitcoin is also transparent and verifiable, which means that its transactions and balances can be easily tracked and audited by anyone on the network.
Furthermore, bitcoin has proven to be resilient and adaptable in the face of various challenges and crises. Despite experiencing several cycles of boom and bust, bitcoin has consistently recovered and reached new highs over time.
Bitcoin has also survived numerous attacks, hacks, forks, regulations, bans, and criticisms from skeptics and detractors. Bitcoin has also evolved and improved over time with the development of new technologies and innovations, such as the Lightning Network, Taproot, and Schnorr signatures.
Smart money is piling into bitcoin because they recognize its value proposition and long-term potential. Bitcoin is not only a scarce and deflationary asset that can hedge against inflation and currency devaluation but also a global reserve currency and a store of value that can challenge and transform the existing financial system.
Bitcoin is also a resilient and adaptable asset that can overcome various obstacles and threats while continuing to grow and innovate. As more smart money enters the bitcoin market, we can expect to see more adoption, liquidity, stability, and legitimacy for the cryptocurrency industry.