Could Bitcoin Go Mainstream? Canadian Banks Bet Big on ETFs

The Canadian market is again stirring up interest in Bitcoin as major banks invest heavily in the Bitcoin Exchange-Traded Fund. In addition, this is a new turn in the mindset of the mainstream investor in cryptocurrency after some silence in the market. 

Let's discuss why this is happening and what it might mean for the future of Bitcoin.

Foray into the Future of Finance: Leading the Charge

The National Bank of Canada, the nation's sixth-largest lender, has invested millions in the Purpose Bitcoin ETF in a historic precedent. 

The move underlines large financial institutions' budding tolerance for Bitcoin as a legitimate asset class.

Other major banks, such as the Royal Bank of Canada and the Canadian Imperial Bank of Commerce, followed this. Indeed, both have announced investments in Bitcoin exchange-traded funds. 

This trend suggests greater mainstreaming of cryptocurrency within Canada's financial sector; Bitcoin is making its way into the mainstream. 

The reasons are:

1- Hedge Against Inflation

Bitcoin has gained momentum and can be used to protect against inflation. Investors are trying to find a way to safeguard their wealth as prices rise and money starts to lose value. 

Bitcoin becomes attractive, with a capped supply, as only 21 million coins will ever exist. With its history of rising prices, it is a good option for those who intend to hedge against losing money's value at this high inflation rate.

2- Shifting Perception of Risk in the Post-Pandemic World

The COVID-19 pandemic reset the dial of risk for investors. Conventional markets were highly volatile; this spurred interest in alternative investments such as Bitcoin for many. 

As a rule, today's investors are more accepting of riskier investments as part of diversifying their money against times of uncertainty.

3- Shift to Portfolio Diversification

This is because of the ups and downs of traditional markets; investors have been looking to spread investments across a range of assets, including cryptocurrencies like Bitcoin. 

The addition of Bitcoin to a portfolio has shown promise for better balance. Hence, it could reduce overall risk. Investors are thus looking to find new opportunities for growth by including a mix of investments while managing potential losses. More focus should be placed on including more risky assets in a portfolio, such as cryptocurrencies.

Clear Regulations in Canada

Canada is leading the way in regulating digital assets, making them more predictable for investors. 

Canadian regulations around digital assets are more understandable than those of other countries, which may encourage banks and investors alike to participate in Bitcoin ETFs. 

The transparency in regulations curbs speculation, often part of an investment in cryptocurrencies. Here are the possible ramifications:

Mainstream Adoption

This is the real turning point for Bitcoin in Canada. The fact that multimillion-dollar banks, trusted by the general population, are starting to invest in cryptocurrency speaks volumes to the validity and encouragement of everyday investors. 

It may ignite a wider diffusion of Bitcoins into Canadian society and everywhere else. 

Increased Liquidity in the Market

Institutional investments into Bitcoin ETFs bring more money into the general cryptocurrency market and boost liquidity. 

In such a case, transactions can become easier while the prices may, at that time, start becoming less volatile and make Bitcoin increasingly stable for longer-term investments.

Investor Education and Awareness

Banks can educate their customers on the risks and opportunities of investing in Bitcoin. Greater participation by financial institutions could provide guidance and instruments to investors for making better decisions. 

This way, responsible investments could be guaranteed, and a better general understanding of this cryptocurrency market could be obtained. 

What is The Future?

The recent steps the banks took suggest a comfort level improving with Bitcoin ETFs. 

Remember, though, that Bitcoin remains a highly volatile asset. Investors should be cautious, do their homework, and understand the risks before diving in.

Crypto Accountants can help you with crypto tax compliance and due diligence. Contact us to get more information.