The surge in institutional interest in investing in Bitcoin, is this really 100% positive?

Source: BlockBeats

According to the previous statistics of Bitcoin Treasuries, among the 4,000 listed companies on the New York Stock Exchange, 11 of them already hold Bitcoin, with a total of about 592,806 Bitcoins. This data has continued to grow. Among these companies holding Bitcoin, funds such as Grayscale and Coinshare are equivalent to custodians.

While the news of more institutional interest in Bitcoin would be seen by most as a positive sign, a recent Longhash report states that “in the short to medium term, the positives far outweigh the negatives. However, over the next decade or so, if Bitcoin eventually develops into a global currency above a store of value, it may pose certain security risks.”

Source: Bitcointreasuries.org

Currently, Bitcoin owned by public institutions in the United States accounts for 5% of its market value, with MicroStrategy having the largest share.

Another notable company, Grayscale Capital, is also increasing its cryptocurrency holdings. According to data released by Grayscale on November 6, its total holdings exceeded $9 billion. Bitcoin trust holdings are worth $7.648 billion, and Ethereum trust holdings are worth $1.104 billion. Grayscale's total asset management has increased more than 200 times since December 31, 2014.

CME Group’s trading volume has also seen a significant increase recently due to the growing demand from institutional investors. The open interest in Bitcoin futures shown in the figure below reflects the institutional interest in Bitcoin investment.

The market has largely viewed this relatively new institutional interest as good news, and the market itself has rebounded on the news and buying pressure, with Bitcoin up 22.8% so far this month.

However, there may be some potential problems.

The first problem is that as the price of Bitcoin rises, so too will the dollar value of Bitcoin held by institutions . If Bitcoin is truly undervalued as some proponents claim, then a large appreciation in price could mean that the supply of Bitcoin is diluted for regular investors .

Another thing to consider is the age-old issue of regulation, with the potential risk of confiscation if Bitcoin becomes accepted as a currency and central banks see it as a threat to fiat currencies.

As Theta Seek said on Twitter, these Bitcoin bonds held by public companies could easily be seized by the government. But while his comments have sparked some speculation, there are no completely clear regulations to determine how the government will treat cryptocurrencies.

How Bitcoin is viewed will indeed play a big role in how governments treat it - if Bitcoin is seen as a more safe haven asset, then perhaps governments will be less likely to take special regulatory action against Bitcoin.