The team at Blockchain.com, a leading crypto wallet provider, trading platform, and block explorer service, has shared their August Market Outlook report, titled, The Final Crypto Adoption Frontier.
Bitcoin or BTC adoption as an investment asset began with what is “often characterized as ‘retail’ (smaller investors),” Blockchain.com writes in a blog post.
During the past 12–18 months, we’ve all seen giant Wall Street institutions and even billionaire investors such as Stan Druckenmiller and Paul Tudor Jones, and to a “lesser degree” major corporates such as Tesla and Square, “increasingly adopt bitcoin for investment purposes.”
However, the Blcockhain.com team points out that one key investor category remains, “officially, at least,” largely on the investment sidelines: government.
As Blockchain.com notes in a blog post, they believe it is “only a matter of time” before government institutions officially start embracing and owning digital assets such as Bitcoin.
According to the company, this will be “one of the most significant developments in the history of bitcoin and could have massive implications for regulatory clarity and global adoption.”
As noted in the report from the company, BTC has seen the “first positive monthly close since March with bitcoin +20% and Ethereum +15% for July.” Blockchain.com’s blog post also revealed that on-chain activity “continued to decline for the month of July with average BTC fees dropping -36% from $6 in June to $4 in July, while hashrate has begun to rebound from the Chinese mining exodus.”
As stated in the report, broader asset markets including equities, bonds and gold “were up for July (+2 to 4%), with the US dollar slightly down (-0.4%).”
The report further noted that out of the four major investor categories, “sovereigns are the last to arrive to bitcoin.” Sovereigns are “one of if not the largest holders of gold (~$2 trillion), and like other gold investors we expect more to increasingly diversify into “digital gold” (bitcoin),” the company added.
They also mentioned that minor allocations of 1% of AUM from “a select group of sovereign institutions” would still equate to “tens of billions of US dollar value inflows into bitcoin.”
While sharing other updates, the Blockchain.com team noted that when it comes to non-US crypto exchanges, regulators have been “targeting offshore exchanges.”
Meanwhile, stablecoins have been “growing size and opacity of reserves have regulators concerned.” The company also mentioned that DeFi or decentralized finance has seen regulators “actively monitoring derivatives on DeFi, a typically tightly regulated activity.”
Last month, Bitcoin (BTC) saw its “first positive monthly close since March with bitcoin +20%. Ethereum (ETH) was up+15% for July,” the report confirmed while adding that in contrast with the constructive price action in July 2021, we saw “a continued slowdown in most on-chain metrics for the month.”
As stated in the report:
“Now, governments have in the past and continue to “own” cryptoassets like bitcoin. This is due to law enforcement seizures since at least the 2013 Silk Road dark marketplace enforcement action, as well as to suspected nation state hacking attacks. Some local government officials like Miami Mayor Francis Suarez have also expressed interest in owning bitcoin as a treasury reserve asset. And El Salvador’s legalization of bitcoin as legal tender certainly opens the strong possibility of that nation holding bitcoin as a state reserve asset.”
The report also mentioned:
“But as of today not a single government entity has declared publicly that it currently owns bitcoin or any other crypto-asset for investment purposes. All we have are circumstantial evidence and secondhand reports of government controlled entities owning crypto for investment purposes.”
According to Blockchain.com, sovereign institutions such as reserve banks are “one of if not the largest holders of gold (at least $2 trillion USD),” and like other individual and Wall Street gold investors, the company now expects sovereigns “to increasingly diversify into ‘digital gold’ (bitcoin).”
As stated in the update from Blockchain.com, concerns regarding the declining purchasing power of the US dollar, along with its ‘weaponization’ for the application of US policy objectives, are also “pushing many governments to consider alternative reserve assets.”
As mentioned in the report:
“Even a minor % allocation from some select governments around the world that we believe are most likely to move first in this direction (eg excluding US, Europe, China, etc.) could dramatically increase the flow of funds into bitcoin.”
While commenting on the shifting regulatory landscape for crypto, the team at Blockchain.com noted that the ongoing cryptocurrency bull market has, “like those before it, once again put this industry on the radar of policymakers and regulators.”
As stated in the report:
“In general, the regulatory environment of the U.S. and countries that follow its lead is still favorable toward cryptocurrencies. There is a settlement that an individual user of the network, be they a payer/payee, miner, or node, is not regulated as a financial intermediary might be. Similarly, the SEC has seemingly settled on where they view the line on whether or not a particular token is a security. Overall, this is good news for cryptocurrency networks.”
The report added:
“There are some areas of concern however. These mostly relate to companies that have built businesses on top of cryptocurrency networks, rather than the networks themselves. Unlike the networks, companies have regulatory obligations and can be targets for enforcement.”
For more insights from Blockchain.com, check here.