Institutional Investors Might yet Prove that Fortune Favours the Bold Amidst Crypto Winter

winter crypto

By Anton Chashchin

It’s been one year since Matt Damon’s now infamous pro-crypto ad was released amidst a happy peak in the price of Bitcoin. Not long after, the crash hit, and Damon’s face pluckily telling viewers that ‘fortune favours the brave’ disappeared from TV screens.

The backlash was merciless. As writer for The Intercept, Jon Schwarz, pointed out on Twitter on June 14: “If you bought $1,000 of bitcoin the day Matt Damon’s commercial came out, it would now be worth $375.”

What Damon got wrong, however, wasn’t that crypto is the future. It will no doubt play an inevitable role in shaping our economy in the years to come. It was that “mere mortals” would lead its triumph into the mainstream.

While the groundswell support for blockchain technology has primarily been driven by retail investors, it is now institutional investors who are taking up the baton. Major financial firms are now leading the way into a whole range of digital assets, which now extend far beyond just the major coins like Bitcoin and Ethereum, and their derivatives.

Three areas which have captured the imaginations of institutional investors when it comes to crypto and blockchain more broadly are the metaverse, NFTs and crypto wallets.

1. The metaverse

Virtual reality, mixed reality, augmented reality and other similar technologies have been around for a long time, but Decentraland and other companies in the crypto ecosystem are now fundamentally changing how we think about the metaverse. Prophecy Market Insights predicts that the global metaverse market accounted for $337.23 million in 2020, and is predicted to reach $1,003.06 million by 2030, with a compound annual growth rate of 11.50% in the interim.

With recent forays by key players in a range of sectors, from Vogue to the UAE government, excitement for metaverse’s many applications is building, and the potential to turn a profit is huge thanks to the crypto-decentralised core structure that underpins it. Institutional investors have recognised this and begun entering the market. Venture capital firm Andreessen Horowitz (a16z), for example, recently launched a $600M fund focused on metaverse games.

2. NFTs

Non-fungible tokens (NFTs) present a new frontier of promising investment opportunities for investors, asset managers and creators by commodifying previously non-tradable assets. A Finder’s panel of fintech experts recently predicted that the NFT market cap will reach $26 billion by the end of 2022, and balloon to $146 billion by 2025.

Though the current narrative around NFTs often focuses squarely on art and collectibles, legacy institutions like Christie’s and Sotheby’s entering the space at speed have further energised the market, giving it credence as an asset class and inspiring confidence among both retail and institutional investors who were previously watching with intrigue from the sidelines.

Of course, the persistent challenge of the complexity of new digital spaces, and a lack of regulation and oversight, has left the sector open to scams and crashes, such as we saw in the US recently with virtual real estate NFTs ‘Platzees’ being suddenly removed from the world’s largest NFT marketplace, OpenSea.

However, that is exactly why institutional investors are best placed to lead the charge, with the ability to advocate for stronger protections and more robust regulatory frameworks that will allow them to launch into digital assets like NFTs more confidently. Already major crypto exchanges and other players in the space are cooperating with lawmakers on sanctions and other monitoring tools. Those interested in profiting from crypto must follow suit.

3. Crypto wallets

With the evolution of Web 3 ecosystems, in tandem with growing institutional interest, the question of digital user identification is increasingly being raised among decentralised finance (DeFi) developers.

Far-sighted institutional investors are already paying attention to promising projects related to crypto wallets, which will become the key to being present in the metaverse, used as an entry into games, to help build collections of non-fungible tokens (NFTs), and to enable business transactions. Crypto wallets will operate independently of crypto exchanges and be connected to everything that users and companies are already doing online.

Not just fortune that favours the bold

Given the recent volatility in digital assets, it’s natural to be sceptical about future opportunities in the blockchain technology space. But it would be irresponsible to ignore their inherent value.

Institutional investors who understand the enormous future potential of the likes of the metaverse, NFTs and crypto wallets will know that it is more than fortune that favours the bold. The inevitability of the growth of this space is on their side, what’s needed now is a global, collaborative effort to smooth out the wrinkles. Investors keen to reap maximum profits should engage with regulatory bodies today to help build a crypto sector that is safe, profitable and, most importantly, sustainable.

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