One of the reasons for Bitcoin's violent fluctuations is the entry of large institutions

The recent rise and fall of Bitcoin has given investors a roller coaster ride. Last week, the price of Bitcoin once exceeded $40,000. Although the market took a sharp turn for the worse after Amazon denied the report about Bitcoin, now there are many signs that Bitcoin is about to rebound.

Germany to allow certain institutional funds to hold up to 20% in cryptocurrencies

Last Friday, news broke that Germany plans to allow certain institutional funds to invest billions of dollars in crypto assets for the first time.

It is reported that a law will come into effect in Germany on Monday that allows so-called Spezialfonds (special funds) with fixed investment rules to invest up to 20% of their funds in Bitcoin and other crypto assets. These funds currently manage about 1.8 trillion euros (2.1 trillion U.S. dollars) in assets and can only be participated by institutional investors such as pension companies and insurance companies.

According to the Crypto.com report, as of June 2021, the number of global cryptocurrency users has reached 221 million, and it took only four months to increase from 100 million to 200 million users. The growth in the number of users starting in January and February this year was driven more by Bitcoin, but since May, it has benefited from the adoption of altcoins, increasing the number of users from 143 million at the end of April to 221 million in June, a surge of nearly 80 million new users, most of whom are interested in tokens such as ShibaToken (SHIB) and Dogecoin (DOGE).

It is well known that lawmakers around the world have been slow to accept crypto assets, as the price of Bitcoin has been up and down and the market seems to be dominated by a small number of investors. However, foreign media pointed out that Germany's move marks the transformation of this asset class into a mainstream asset, and some big names in the financial industry such as Mike Novogratz and Alan Howard have also invested in it. Tim Kreutzmann, a crypto asset expert at BVI, a German fund industry organization, said: "Most funds will initially be far below the 20% level. On the one hand, institutional investors such as insurance companies have strict regulatory requirements for their investment strategies. On the other hand, they definitely want to invest in crypto assets."

Kamil Kaczmarski, a financial services consultant at management consulting firm Oliver Wyman LLC, said that while many German investors may not be interested in Bitcoin and are traditionally very conservative, the fund is expected to conduct a small trial first.

Billionaire reveals: Institutions are "buying up" in the cryptocurrency circle

Billionaire and Galaxy Digital founder Mike Novogratz believes that one of the reasons for the volatility of the Bitcoin market is institutional buying, and Amazon's statement last week can confirm this view. He told CNBC: "Institutional buying will cause Bitcoin to rebound, which to some extent leads to a large-scale short-covering rebound." Not long ago, Novogratz, a well-known Wall Street hedge fund trader, named the cryptocurrency exchange startup FTX, which attracted $900 million in funding in its Series B round of financing. He mentioned the strength of investors in this round of financing, including SoftBank and Paul Tudor Jones. He said this sent a message to the market that cryptocurrencies are here to stay.

But it’s important to note that some lawmakers are doing their best to make it harder to invest in cryptocurrencies. U.S. Senator Elizabeth Warren wrote to Treasury Secretary Janet Yellen, urging the former Federal Reserve Chair to crack down on the cryptocurrency industry. Senator Warren portrayed retail investors as victims who could suffer financial losses in the face of volatility in the crypto market.

But Novogratz disagreed. He called on traditional finance to solve problems such as bank overdraft fees on social media, while defending the cryptocurrency industry and its participants. Novogratz believes that Warren's ideas are too traditional: "If banks had the same standards as decentralized finance in terms of transparency, the mortgage crisis of the 2008 era would not have happened."