Institutional Acceptance of Crypto Is on the Rise, Despite Market Volatility

The crypto market has always been volatile, but the recent months have been exceedingly so, with the price of bitcoin going from an all-time high of $69,000 in November to nearly half of that in less than three months, leading to an increase in fear, uncertainty and doubt (FUD). Despite these setbacks, the lowered cost of bitcoin, ether and other coins has allowed many small investors to enter the space. Since then, the market has mostly recovered, with 2022 set to become an important year for crypto.

Just this month, news emerged that BlackRock – the world's largest asset manager with $10 trillion assets under management – is preparing to enter the crypto market. It would reportedly either allow its institutional clients to use crypto assets as collateral for loans or allow them to trade various crypto assets on BlackRock’s Aladdin trading platform.

It is not just financial intermediaries who are edging closer to crypto. For example, this month KPMG – one of the so-called Big Four accounting firms– announced it is adding bitcoin and ether to its Canadian treasury, essentially using these coins as a reserve currency for its activities.

A recent report by Deloitte – another Big Four firm – showed how crypto adoption by businesses is increasingly becoming mainstream. “More than 2,300 U.S. businesses accept bitcoin, according to one estimate from late 2020, and that doesn’t include bitcoin ATMs. In addition, an increasing number of companies worldwide are using bitcoin and other digital assets for a host of investment, operational, and transactional purposes,” the report said.

While many headlines might focus on the price volatility of certain coins, beneath the surface there is a growing acceptance of crypto as an important component of the global financial system. Indeed, any increase in institutional adoption of crypto builds more price support for some of the leading coins.

“If you look at the data filings of public companies, such as MicroStrategy, this shows that their average cost of bitcoin is around $30,000 to $40,000,” says Annabelle Huang, Managing Partner at Amber Group in Singapore. “This is a good support level for other institutions looking to get in.”

To make the move into crypto, institutions are looking for leadership and guidance to navigate the digital asset space better. Amber Group is a fintech unicorn backed by some of the best investors in the world. The company recently reached a significant milestone by having $5 billion in assets under management, and a cumulative transaction volume since inception of more than $1 trillion. Over the past year, Amber Group's institutional client base has more than doubled, from 500 to over 1,000. In 2021 alone, Amber Group paid out more than $150 million in interest payments to clients.

The volatility in crypto spot prices is a source of opportunity for many institutions, as are the yield opportunities in other products derived from the cash market. “We do have many examples of working with family offices and HNWIs to help them with their digital asset portfolios across our yield products, where they can earn optimal returns with their desired exposure,” says Huang. “A popular structure is through covered put strategies where they earn enhanced yield for potentially buying below the current market price.”

Amber Group's industry leadership is closely tied to its commitment to upholding security and regulatory compliance. The company has achieved Service Organization Control (SOC) 2 compliance – an external, independent audit that benchmarks industry best practices in IT, security and privacy controls. Amber Group’s global headcount more than tripled in size in 2021, from less than 200 to around 650 employees, and now boasts 12 offices spread out across six continents.