The Digital Asset Renaissance of 2021

For digital assets, 2020 was the year of regulatory evolution, and 2021 will be the year of institutionalisation and increasingly rapid adoption by professional and institutional investors.

Over the last few months, digital asset markets have experienced the beginnings of a renaissance, with a rapid influx of institutional and corporate adoption driving interest – and asset prices – to new all time highs through the end of the Lunar New Year. This movement will continue throughout the year, ushering in a new era of digital asset finance.

Bitcoin and Ethereum reached recent record highs of approximately USD58,000 and USD2,000, respectively, illustrating a continued and growing interest in the asset class by professionals. The high’s come off the back of major announcements, including BNY Mellon’s stating last week that it would custody crypto assets, MasterCard’s February 10 news that it would accept digital asset payments in its network in the near future, and Tesla’s 8 February announcement that it had purchased USD1.5 billion worth of BTC (and that it would in the future accept BTC as payment for its products). At the same time, the market has been awash with rumours that Apple will follow suit, spurring speculation that BTC and other digital assets could climb ever higher. 

Meanwhile, regulatory clarity has come to fruition in key jurisdictions such as Hong Kong, creating an environment that allows institutions and professional investors to gain exposure to digital assets with confidence. This is another element of the current rally – institutional participation and asset allocation.

At OSL, we’ve witnessed this institutional adoption first hand, with record institutional inquiries and inflow to our brokerage and exchange platforms over the past several months.

Digital assets like Bitcoin deliver returns. Professional investors have taken note, with wealth managers, family offices and HNWIs increasingly using BTC as a trading asset, a hedge against inflation; and a diversification tool within a broader portfolio of traditional assets.

With the Biden administration’s personnel, policies and economic stimulus package taking clear shape and effect, global equities have rallied again, despite signs that money printing would continue well into 2021. If 2020 is any indication, these activities are also a boon for digital assets.

In a newly regulated market like Hong Kong, there is great potential for further institutional adoption of digital assets. Licensed investing and trading in stablecoins and digital securities such as STOs by professional investors are new capital market innovations that are taking hold – and are certain to further fuel the digital asset renaissance, driving even more institutional flows into the sector in 2021. 

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