Why 2021 Could Be the Year Institutional Investors Pour Capital into Ethereum

What a crazy 12 months it’s been for cryptocurrencies. Just a year ago, Ethereum and all other cryptocurrencies (as well as the broader investing market) were facing an uncertain future thanks to the onset of the coronavirus pandemic.

Take a moment to think about the fact that on March 13, 2020, you could have had an Ethereum token for $184 Canadian. Even with a 25% pullback happening at the time of this writing, one ETH token will now set you back close to $1,800 Canadian.

Much of this is actually thanks to institutional investors pouring a lot more capital into Bitcoin. More and more investors, celebrities and publicly traded companies are building their own Bitcoin treasuries as a way to hedge against the inflation of fiat currencies.

Some of it is also due to the fact that the great majority of decentralized finance projects captivating investors, and thus generating high volumes of transactions and increased utility, live on the Ethereum blockchain.

All of that being said, Ethereum is still waiting to benefit from an onslaught of institutional investment. At the moment, large companies with enormous cash reserves are still picking Bitcoin as the undisputed champion of storing value in the decentralized world.

But in this Progressive Investor post, it’s time to explore why 2021 could be the year the smart money finally starts to recognize the true value of the world’s top altcoin, Ethereum.

Why Bitcoin is Ethereum’s On-Ramp to Institutional Investors

Everybody’s cryptocurrency journey starts with answering one key question: What is Bitcoin? Heads of publicly traded companies and hedge fund managers are no exception when it comes to having to figure out the answer to that question before investing in cryptocurrencies.

At the height of the last Bitcoin boom that gripped crypto newbies and mainstream media four years ago, the earliest crypto adopters dreamed of the day when institutional investors would begin taking Bitcoin seriously.

At that time, those who really had a penchant for risk were looking into initial coin offerings on the Ethereum blockchain. Today, those initial coin offerings are the catalyst behind the world of decentralized finance. Now that retail investors are in the know, the institutions can follow suit. The point is that everybody has to start somewhere.

It might be hard for retail investors like you and I to fathom that somebody with billions of dollars (who understands that the money is always in the future) would be afraid to pour capital into cryptocurrency. But the truth is whatever amount of money an investor happens to be playing with, the decision-making process and the journey towards becoming cryptocurrency-friendly requires everyone to make a fundamental shift in their minds.

The fear versus greed phenomenon that grips the worlds of both traditional finance and cryptocurrency is the same no matter who you are and no matter how much capital you’re investing.

Now that the institutional world has had more than a year to get acclimated to investing in Bitcoin on a large scale, it makes sense that Ethereum will be next.

The shift in mindset Ethereum lovers need to see institutional investment within the project’s ecosystem ramp up is now evident. The fundamental value of what’s happening in that ecosystem is revealing itself too.

More and More Investors Are Trading Unique Ethereum Tokens

Bitcoin provides value because it’s a proven store of value. Ethereum provides value because of its utility. Developers love to use it to build new projects. Investors love to use it to speculate on opportunities to earn significant profits within the world of decentralized finance. Both of these activities require different types of Ethereum-friendly tokens.

Although the use of new Ethereum tokens is not increasing as rapidly as it did when the initial coin offering bubble burst in 2018, it’s still trending upwards. That’s why Ethereum is still the leading altcoin in crypto, even though projects like PolkaDot, Cardano, Tezos and others are moving forward in development quickly.

The constant creation of new tokens and the evolving use case for such tokens is a big reason why Ethereum transactions exceeded $1.3 trillion Canadian last year. By comparison, PayPal facilitated around $1 trillion worth of transactions last year, which averages out to approximately $250 million worth of transaction fees every fiscal quarter.

Ethereum isn’t just the silver to Bitcoin’s gold anymore. It’s clearly standing on its own two feet.

The Total Value of Decentralized Finance Projects Is Rising Exponentially

At its coronavirus low on March 13, 2020, the world of decentralized finance was worth just $500 million USD. At the time of this writing, that number stands at over $35.5 billion USD. That represents a whopping 70x return on investment for those that understood the fundamental value of removing financial advisors and middlemen from the investing world from the get-go!

Consider that just under a year ago, you probably didn’t understand anything about yield farming, liquidity pools or decentralized exchanges. By now, if you’re not actively using those things, you at least understand how they work.

The cryptocurrency world really does move at the speed of light. Imagine what it’ll be like once the speed and efficiency of blockchain transactions catches up with all of the amazing ideas being created by the crypto industry’s leading innovators.

DeFi Projects Are Targeting Institutional Investors More Directly

Custodial services and new cryptocurrency projects dedicated to allowing institutional investors access to traditional financial exchanges, stablecoins and liquidity are now coming out of the woodwork. Projects like Alchax, Algorand and xSigma are a few worth keeping an eye on.

While neither of these projects lives directly within the Ethereum ecosystem, investors will inevitably look to Ethereum-based projects first once large-scale transactions are easier to make and more cost-friendly. The Ethereum 2.0 upgrade we’ve covered in a previous Progressive Investor post will also play a key role in that.

CEOs and Celebrities Pumping…and HODLing

Dogecoin is the running joke of cryptocurrency. Its claim to fame is the fact that its logo features a cute looking dog. Most people say there is no fundamental value in Dogecoin’s blockchain or programming structure. They are right. But it is providing fundamental value in a social sense.

Dogecoin just happens to be the reason more CEOs and celebrities are connecting the dots between cryptocurrencies, social media as a tool for aggregating investment ideas, and the fact that it really is worth it to hold cryptocurrency as part of a balanced portfolio.

Don’t underestimate the social media aspect of investing. Social media platforms allow retail investors like you and I to come together and discuss our respective investing philosophies.

They also allow us to stay up-to-date on investing news faster than we ever could before, and it’s obvious now that said platforms are a great equalizer in allowing small-time investors to even the playing field as we compete against (and can now beat) hedge fund managers at their own game. The Dogecoin pump and the GameStop frenzy are proof of that.

This isn’t all just for nothing. It’s thanks to the above occurrences that a company like Tesla decides to invest $1.5 billion USD in Bitcoin.

It was all just fun and games when Elon Musk was pumping Dogecoin and changing his Twitter bio to #bitcoin. But the fact is, it’s only a matter of time before other publicly traded companies living on the S&P 500 index follow in Tesla’s footsteps.

Once they do that, Ethereum funds will become the next place that investors look to for fundamental value within the crypto space.

When Will Institutions Invest in Ethereum?

The short answer to the above question is that institutional investing in Ethereum is already happening. Sure, it’s probably not accelerating as fast as you would like but given how much is happening within the ecosystem, there is no way hedge funds are going to ignore it for much longer. Both the Ethereum token and its ecosystem are undervalued assets. Some in the traditional investing world are already recognizing that.

An Ethereum futures market now exists. CME Group is behind it. 3iQ, the crypto investing firm behind Canada’s own stablecoin QCAD, is also behind The Bitcoin Fund and The Ether Fund, two publicly traded financial instruments that allow both institutional and retail investors to own Bitcoin and Ethereum within traditional stock trading accounts.

It’s only a matter of time before each of these instruments along with a maturing and evolving Ethereum ecosystem lead to more significant capital being invested in the project.

Buy Ethereum Tokens at Netcoins Now

While traditional financial instruments are now offering a gateway to Ethereum investment for all investors, the safest way to maintain control over your wealth during these uncertain times we’re all living through is to buy actual Ethereum tokens and store them on a hardware wallet.

Doing just that is as simple as registering for a free account at Netcoins. Netcoins is a cryptocurrency exchange in Canada that offers fair market rates and minimal slippage to you.

Get your hands on Ethereum, Bitcoin and Canada’s very own stablecoin QCAD today. If billionaires and hedge funds are investing in it, you should at least consider doing your own research to get a sense of what it means to dive further down the crypto rabbit hole.

Looking to buy and sell ETH? Netcoins is Canada’s first publicly owned crypto trading platform to be fully regulated. Simply create an account with Netcoins, fund it with an e-Transfer (more funding options available) and head to the trade page to buy ETH. Sign up today!