Don't count on the institutional big bang in crypto, because slow and steady wins the race

Just the other day, a media report sent shockwaves across the cryptoverse—was Amazon, the eCommerce titan built by the richest man in the world, about to embrace crypto? The market shot up as bulls pushed the pedal to the metal, eyeing the promise of plenty. We all know how this one ended though: The retail giant denied the rumor, and the bull run came to a screeching halt. 

To those who have kept a watchful eye on the cryptoverse, this confirmed a recurring and persistent theme, namely, the enthusiasm for crypto adoption from major league players. “The institutions are coming!” has been a repeating refrain since the bull market of 2017. Those enthusiasts should not be fully dissuaded, because the dream of institutional adoption does hold water. Some are just dreaming it wrong.

Don’t look for a watershed

The Amazon-instilled bull run is somewhat reminiscent of a scenario that played out earlier this year with Tesla, which sent Bitcoin on an upward swing by announcing it would be accepted as payment for its electric cars. The company scrapped the plan fast, ostensibly due to bitcoin’s alleged environmental footprint, and it remains unclear if the company sold a single Tesla for Bitcoin while the window was open. The other question seems to be how Tesla advanced so far into crypto adoption without understanding this topic clearly. Don’t we assume that at least engineers read instructions?

Even though crypto markets do respond to the antics of influencers like Tesla’s chief Elon Musk, the impact they leave is usually nothing more than a temporary fluctuation that you shouldn’t pay too much attention to. The branding potential of bitcoin and blockchain does attract the attention seekers from time to time, what can you do. Everyone remembers The Long Island Iced Tea company, don’t they? Bitcoin’s core value lies in its mobility, the built-in full-transparency ledger, and lack of centralized regulation, not from influencers chirping about it on social media. 

And yet, such rumors and announcements do stir crypto enthusiasts’ dreams with the promise of purely pragmatic added value. It’s hard to imagine a HODLer who would be willing to part with their treasured coins for a shiny new Tesla or a library’s worth of Kindle books. Nevertheless, being able to buy such items with Bitcoin bolsters its real-world practicality. After all, you don’t come to a car dealership with a bunch of stocks in your wallet, or a bag of gold. 

For some, this even goes beyond the basic value calculus. While crypto purists may not favor more ties between the cryptoverse and traditional financial markets, a large swathe of the community will be excited to see more involvement from top banks and corporations. Among those, many seem to be anticipating a magical watershed moment where the floodgates burst open, and a cascade of institutional cash pours into the cryptoverse, sending Bitcoin to the Moon, and the rest of the altcoins with it. But as we all know, that’s simply not how it works.

Building bridges, one at time

Various deals and partnerships announced in recent months offer a clearer picture of where things actually stand. Jack Dorsey’s Square, an e-commerce ecosystem which recently acquired Afterpay in a deal that hit headlines, announced plans to dabble in DeFi, building a Bitcoin-based platform for DeFi developers. Square has become a massive player in the payments industry, a clear-cut example of a fintech company that started in traditional finance expanding into crypto and cashing in massively. Even more interesting than the acquisition is the agreement that Square will subsequently dual list on the Australian Stock Exchange, making a crypto company an absolute behemoth in that market, larger even than some banks. 

Earlier, in May, another acquisition saw Nuvei Corporation, Canada’s payments giant, buy Israeli crypto startup Simplex for $250 million. Another payments company stepping into the fray is PayPal’s Venmo, which added support for crypto to its platform in April of this year. PayPal itself began allowing the purchase of cryptocurrencies back in November last year. I am sure you have picked up on the theme here by this point. Fintech was born out of the promise to bring finance into the digital century, and entering crypto is simply the next logical step.

It’s not just payment firms who are in on this. Fidelity Investments, the Boston-based financial services giant, is another stellar example of how the big players are approaching crypto. In August, Fidelity bought a stake in both Hong Kong’s BC Group, a pure crypto company founded by ex-HSBC technology alumni Dave Chapman and Hugh Madden, best known for the digital asset brokerage firm OSL, and Marathon Digital Assets, one of the largest crypto mining companies in North America, according to a Forbes report. Fidelity spread the investment across four of its funds. In May, the company also reported that its Bitcoin ETF raised some $102 million since opening.

Earlier this month, JPMorgan offered its clients exposure to crypto funds, according to a CNBC report. The bank was quiet about the move, but commentators still viewed it as a further indication of Wall Street’s appetite for digital assets. A plethora of other reports indicates that the banking industry is generally looking to move closer to the crypto scene, having increasingly recognized the growing crypto appetite of its clientele. Even Goldman Sachs, “the great vampire squid” itself, no stranger to brand marketing, has created a new “non-deliverable forward” derivative based on crypto, put its name on a crypto ETF, opened a crypto trading desk, investigated crypto custody and denied the validity of crypto as an asset class, all within a 12-month span. 

Slow trickle, not downpour

These examples do showcase how exactly major financial institutions—not just the top banks, but also fintech leaders—are entering the cryptoverse. It often happens without much in the way of fanfare, sometimes indirectly, with another entity as a buffer between the company and the crypto markets. In a few rare cases, like that of Square/Afterpay, the crypto companies have merged with non crypto firms. Watch this space for Coinbase doing the same. 

If these trends persist, it wouldn’t be unimaginable to expect major players to have acquired a sizable share of the crypto companies out there in the near future. By the count of Google Alerts, excluding duplicates, there have been 313 stories about Fortune 500 companies either investing in or moving into the cryptocurrency space in the past 12 months. Here’s a list of major companies that have exposure to crypto, while here’s a list of large companies exploring blockchain. These companies will be working as a network of bridges connecting the cryptoverse with the traditional financial markets, which would amount to the adoption dream essentially coming true. 

While it’s interesting to see this adoption movement play out, it’s important to remember that cash is now digital, yet many backend financial systems are coded in Cobol, which was designed in 1959. In some cases, it still takes a week to send money overseas. Blockchains are a system built specifically for disintermediated digital money, able to transfer close to instantaneously. In short, the technological promise offered by blockchain is not simply a branding boon. Or simpler still, blockchain has as much to offer traditional finance as they have to offer us. As an industry, blockchain companies seem desperate for external validation from the middlemen, but they’ve got more to learn from us than vice versa. Sometimes it pays to be careful what you wish for.

The truth is, there will never be a magical watershed moment where we can say: “Okay, we got the institutional adoption, on to the next big thing.” There will never be one final bull run to rule them all, one that would in a few seconds bring crypto to the forefront of the global financial system. What will happen, though, is a gradual transformation emerging at a speed that may feel slow for the mercurial cryptoverse. A slow accretion and merging, at a seemingly glacial pace, which could take a decent fifteen years. And yet, this is the way the adoption dream is coming to fruition: Slow and steady wins the race, and the momentum is there to keep the process moving.