Report: The Block —— Changes in Market Trends after Institutions Entering The Market

2022-12-09, 06:24

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![](https://gimg2.gateimg.com/image/article/167057447720221209-162629.jpeg)
[TL; DR]

-"The institutions are coming!" - it has been repeatedly mentioned by the market for a long time.

-In May 2022, the algorithmic stablecoin UST depegging posed a "fundamental" change.

-stablecoin, DeFi, and NFTs represent the three top innovations built on the <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> L1 platform, and also make more institutions pay attention to <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> and other smart contract platforms.

-The inclusion of BTC in the balance sheet is an important part of an institution's asset management strategy.

<_iframe_ title="How Web 2.0 Companies Invest in Web 3.0: Tesla, Nike, Microstrategy | Gate.io" src="https://www.youtube.com/embed/5kEr5IqnQBc" allow="autoplay; encrypted-media" allowfullscreen="true" data-time="214" data-date="2023-02-05" data-desc="There is still much skepticism about cryptocurrencies due to Terra Luna UST and FTX collapses that have caused major uncertainty for new investors. Can the blockchain industry redeem itself? " data-thumb="https://gimg2.gateimg.com/image/1677566187540709083Hw.jpeg">
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## Introduction

As more and more institutions participate in the crypto market, it has promoted the blowout growth of market trading volume, significantly improved the liquidity of the entire digital assets, and opened the door for more institutions to participate.

## Entering The Market

"The institutions are coming!" - it has been repeatedly mentioned by the market for a long time. In the past 24 months, it has finally become apparent that from JPMorgan Chase to Visa, some of the world's most famous companies and institutions have begun to embrace cryptocurrencies.

In January 2018, the total market value of digital assets surpassed $800 billion for the first time. By the end of 2018, it had plummeted to $125 billion, reducing its market value by approximately 85% in 2018.

In November 2021, the total market value of digital assets exceeded $3 trillion for the first time, an increase of 2300% compared with the low point in 2018.

In July 2022, the total market value of digital assets fell to $900 billion, reducing the value by 70% and the market value of approximately $2 trillion.

In recent years, with more and more institutions entering the crypto market, a large number of hot money surged and short-term profit-taking led to the "repeated horizontal jump" of the total market value of cryptocurrency.

## Fundamental Change

In May 2022, the algorithmic stablecoin UST depegging posed a "fundamental" change.

This led directly to the main catalyst of the long bear cycle in 2022.

Since the UST collapse, a larger "cryptocurrency credit crisis" followed, resulting in many institutional platforms being forced to sell off and tightening risk exposure.

Similarly, the lack of risk management and fraud allegations of digital asset investment and trading companies has also aroused concern among more institutions, forcing them to sell.

The butterfly effect caused by the decoupling of UST has triggered frequent crashes such as 3AC, Celsius, and FTX, which has shaken everyone's confidence in the entire crypto market in 2022, making many institutions start to rethink their digital asset strategies.

## Application
![](https://gimg2.gateimg.com/image/article/16775719744.png)
Market value change of <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> and L1

As can be seen from the figure above, the development of L1 platforms such as <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> has expanded the scope of blockchain applications, which is far beyond the scope of BTC applications and has stimulated the innovation of a series of application projects.

Among them, stablecoin, DeFi, and NFTs represent the three top innovations built on the <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> L1 platform, and also make more institutions pay attention to <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> and other smart contract platforms.
![](https://gimg2.gateimg.com/image/article/16775719985.png)
BTC futures trading volume of CME in recent six months

Although compared with the foreign exchange market of traditional currencies, the trading volume of digital assets is still dwarfed, the positive change in this trading volume has also improved the liquidity of digital assets significantly, and opened the door for more institutions to participate in it.

In December 2017, the first regulated digital asset derivatives entered the market. CME (Chicago Mercantile Exchange), the world's largest financial derivatives exchange, launched BTC futures products.

Although most BTC futures activities take place on unregulated platforms, CME's share of open positions in BTC futures has also reached 19% of the total, and CME's monthly trading volume has exceeded $50 billion. Therefore, the BTC futures Index of CME has become one of the main reference indicators of the market.

In addition, the regulatory nature of the CME BTC futures market will also attract more professional investors and institutions.
![](https://gimg2.gateimg.com/image/article/16775720286.png)
Market supply trend of major stablecoins in 2022

The stablecoin issuers rely on the relationship with traditional banks to issue stablecoin pegging the US dollar.

Although the stablecoins have been dominated by <a href="/th/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> (USDT), their transparency is relatively low, and there is a problem with the Proof of Reserve. However, stablecoins with relatively higher transparency, such as Circle's USDC, have become more and more popular in the market and attracted more and more institutions.

## Current State
![](https://gimg2.gateimg.com/image/article/16775720537.png)
BTC holdings of major companies

The inclusion of BTC in the balance sheet is an important part of an institution's asset management strategy.

In August 2020, MicroStrategy converted its $250 million corporate capital reserve into BTC for the first time. Since then, MicroStrategy has continuously accumulated BTC through cash and convertible bonds.

As of November 15, 2022, MicroStrategy held 130,00 BTCs (worth about $2.2 billion, accounting for 0.7% of BTCs in circulation).

Michael Saylor, CEO of MicroStrategy, talked about his view on all in BTC. "MicroStrategy's investment in BTC is part of the company's capital strategy, which will maximize the long-term value of our shareholders' needs. This investment reflects our belief in BTC, and regards it as the world's most widely used cryptocurrency, which is a reliable value store."

In February 2021, Tesla followed the pace of MicroStrategy and purchased 48000 BTCs (worth about $1.5 billion at the time of investment). According to Tesla's annual report, the purpose of the purchase is to "maximize risk diversification, improve the return on investment, and maintain sufficient liquidity". Although these acquisitions were considered the "watershed" of the industry when they occurred, the long-term commitment of these companies to their investment is still uncertain.

Although MicroStrategy has not sold any BTC it holds, Tesla will sell about 75% of BTC in Q2 2022 to improve liquidity.

In addition, it is uncertain whether BTC investment has added value to shareholders' income.

As of September 30, 2022, the basic cost of BTC held by MicroStrategy companies is $4 billion, and the current market value is $2.5 billion, which means that MicroStrategy still has a floating loss of $1.5 billion.
![](https://gimg2.gateimg.com/image/article/16775720888.png)
NFTs revenue of main brands

NFTs, as an important carrier of GameFi, have shown their adaptability to the crypto market, and more and more brands are trying to maintain the cutting-edge fashion atmosphere and brand awareness through NFTs.

According to the data provided by Dune Analytics user @ kingJames23, the famous brands led by Nike have earned more than $270 million from NFTs.

## Conclusion

Nowadays, the institutions' investment in digital assets has reached an unprecedented level. Despite the recent huge market turmoil, the products and services launched by the institutions and their cooperation with digital asset start-ups have increased. They have begun to embrace more public chains (such as <a href="/th/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a>, <a href="/th/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>, <a href="/th/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a>, AVAX, etc.) in new and unexpected ways and integrate them into their business models.

Although the price of digital assets and the overall mood have fluctuated recently, the development and development of the L1 platform show no signs of slowing down. The Block believes that the long-term growth trend of the public chain application layer will remain unchanged in the next few years.

Although similar events have plagued the traditional financial market for centuries, all signs indicate that the bankruptcy of FTX will become the main obstacle for institutions to enter the market in the short term. The scale of FTX's impact is shocking, which will undoubtedly make people suspicious of more crypto platforms.

In this regard, it is necessary to improve the transparency of the platform, guarantee excellent risk control capability and strengthen third-party supervision. Perhaps only in this way can the industry grow more healthily and orderly, so that more institutions can embrace the blockchain in the bull market.

<div class="blog-details-info">
<div>Disclaimer
<div>Author: Andrew Cahill & Saurabh Deshpande, The Block Research Editor: Gate.io Blog
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
</div>

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