Institutions Are Buying Bitcoin Despite Extreme Fear in Crypto Market

In Brief

• Institutional investors like the New York Digital Currency Group (NYDIG) continue to plug in to crypto despite the current bear market.
• It appears that traditional institutions are taking a long term view of their crypto investments.
• Shopify CEO Tobias Lütke has spent almost $3 million buying Coinbase stock since the beginning of Aug. 2022.

Despite retail reluctance, major institutional investors, like the New York Digital Currency Group (NYDIG), are still betting on bitcoin.

NYDIG, one of the companies responsible for financing crypto miners during the 2021 bull run, recently raised $720 million from 59 investors for a product called the Institutional Bitcoin Fund. The company disclosed the information to the Securities and Exchange Commission in a filing on Sep. 29, 2022. The company said its bitcoin balance hit an all-time high in Q3, 2022.

On Oct. 3, 2022, the company announced two new executive hires, Tejas Shah and Nate Conrad, who both hail from Wall Street banking behemoth Goldman Sachs. Both were hired to drive mining and payments business lines, Bloomberg reported.

“When markets crumble, character emerges. A flight to quality from the most risk-aware institutional investors has relentlessly driven bitcoin, and revenue, to NYDIG the last 12 months,” stated Ross Stevens in a company press release.

NYDIG’s fundraising comes with the market in ‘extreme fear’
While testing for retail investors, the current bear market has proven a suitable time for institutional players to dabble in crypto. The 2022 Annual Global Hedge Fund report by big-four accounting firm PwC found that over a third of hedge funds have invested $4.1 billion in crypto, up 8% from 2021. Asset management giants Abrdn, BlackRock, and Charles Schwab have also dipped their toes in the pool, spurred on partly by clients demanding exposure to the asset class. BlackRock recently announced a spot bitcoin private trust for its institutional clients.

“Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets,” said Joseph Chalom, a BlackRock executive, in Aug. 2022.

Business intelligence company MicroStrategy, while not new to the club of corporate bitcoin holders, recently scooped up 301 bitcoins to take its total stash to almost $4 billion.

Institutional investors, it would seem, have come to terms with crypto’s inherent volatility and have invested in crypto as a long-term play. A case in point, NYDIG’s fundraising, and Microstrategy’s purchases come at a time when the crypto fear and greed index is planted firmly in the ‘extreme fear’ zone, describing much of the sentiment in the retail market.

Shopify CEO bullish on Coinbase stock
The tanking crypto market has also proven a suitable time for wealthy individuals to invest in the space. Coinbase board member and Shopify CEO Tobias Lütke has spent $369,000 weekly on Coinbase stock since the beginning of Aug. 2022, as Coinbase’s share price struggles amidst the current bear market. Coinbase’s stock price, down over 75% since the beginning of the year, often follows bitcoin’s price.

Coinbase shares briefly rallied after its partnership with BlackRock was announced in early Aug. 2022. The partnership will offer BlackRock’s institutional clients access to crypto.

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