“So long for crypto” - Bitcoin and digital assets might end as a fad if institutions allow

Cryptocurrencies, with Bitcoin at the forefront, have been a matter of debate in not just the financial world but also in the political world. Adoption of such a technology is taking some time owing to the decentralization and anonymity that comes with blockchain, but primarily, the success of cryptocurrencies is in the hands of institutions. Their decision holds enough power to effectively minimize crypto to nothing.

Institutions could bring down Bitcoin and crypto

The emergence of cryptocurrencies has always triggered discourse among people since the launch of Bitcoin. The novel technology behind the new form of currency offers both advantages and disadvantages. However, looking at the history of cryptocurrencies, the disadvantages, such as frauds, scams, crashes and illicit uses, have given digital assets a bad rep, resulting in increasing skepticism every day.

Additionally, the novel concept of cryptocurrencies has left global regulatory bodies stumped. Enforcing regulations is a huge step in acceptance, which is taking a lot of time despite cryptos existing for over a decade now.

Furthermore, the volatility and sudden crashes have spooked the investors considerably. These factors altogether might result in the downfall of crypto. However, the helm of the market is still in the hands of the institutional investors who have endured losses for a very long time now.

The Bitcoin profitable days chart, shows that since the digital asset market found global attention, the money-making aspect took a downturn. Since the end of 2020, mid of the previous bull run, investor profitability has gone down despite rising prices. While BTC had a fairly decent 2021, noting two tops and an all-time high of $68,990, the losses did not scale back. 

BTC/USD 1-month chart

Bitcoin profitable days

Between December 2020 and at the time of writing, the only period during which holding Bitcoin was profitable was from June 2022 to March 2023. This is the first stretch of consistent losses for BTC since its conception, increasing concern regarding its sustainability. From its peak of $68,990, BTC has come down to $26,000, and the market capitalization has declined from $3 trillion to around $1 trillion, losing 65% of its value.

Bitcoin profitable days

According to an analyst, DonAlt, these factors might play a role in institutions pulling back, effectively killing cryptocurrencies' chances to succeed. Per the chart below, DonAlt hints towards cryptos losing interest due to various reasons, but money drives money.

Institutions are known for holding a long-term outlook, but once the global markets' trend shifts, i.e., money starts flowing out of crypto, they back out and shift their investments too. Thus, if the primary controllers of the market, i.e., institutional investors, fold, crypto could decline despite the infinite money and attention it holds.

Some comparisons between cryptos and the tech bubble of 2000 were drawn by users, which the analyst addresses, saying,

"The world is 10x faster than back then and we've had 10 years of cryptocurrencies not changing much for the average person."

Thus, if crypto fails to find traction and profitability soon, it ends as a fad, albeit more than a decade-long one.