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In recent years, Bitcoin investments by corporate companies have become increasingly popular. Public companies such as MicroStrategy and Metaplanet are spearheading a major financial transformation by adding Bitcoin to their balance sheets. While this trend is fundamentally changing the dynamics of the cryptocurrency market as a corporate Bitcoin reserve, it also brings risks. So, what happens if the trend reverses while corporations continue to increase their investments in the cryptocurrency community?
How Did the Corporate Bitcoin Trend Begin and Where Is It Headed?
The adoption of cryptocurrencies, primarily Bitcoin, by large corporate companies in recent years did not happen suddenly. There had been expectations in this direction for years. The cryptocurrency world became even more significant after Donald Trump, who was re-elected as President of the United States, expressed his interest in cryptocurrencies and promised to lift existing bans. The current US government’s support for cryptocurrencies has created an environment of trust, naturally leading to the investment opportunities that corporate firms had been expecting. A new trend emerged, initiated by major companies like Microstrategy and Metaplanet, with other corporate firms joining in. The Bitcoin and Ethereum spot ETFs approved by the SEC also gave the crypto community a more secure perspective. As a result, institutional investors began making more aggressive purchases. With the contribution of institutional investors, Bitcoin rose to around $124,000.
Over the past period, existing institutional companies have accumulated significant funds by adding cryptocurrencies to their corporate treasuries. So, if these funds were to be withdrawn, what could the market face?
What Can We Expect When Institutional Investments Reverse?
Although the entry of institutions into the crypto community has created excitement about growth, serious risks that investors should be aware of are also emerging.
Institutional companies do not act based on emotional impulses like individuals do. They act based entirely on the profit/loss relationship. Large corporate crypto investments made so far have been one of the biggest contributors to Bitcoin reaching these levels. However, companies evaluate their current situation by considering many options, such as their current profit/loss balances, investments they will make, and financial debts. They do not hesitate to make new moves in case of a crisis in the market. In the coming period, if institutions with a large share in the crypto market are forced to sell, they could create significant selling pressure in the market.
Serious financial sales (debt repayment, profit-taking) specifically involving Bitcoin could cause deep declines in the market. Therefore, while monitoring the market, crypto investors also need to keep an eye on the moves of institutional companies.
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