Bitcoin has come a long way, from a grassroots monetary experiment to a financial asset that is maturing. While it took time for Wall Street to embrace an independent disruptor, now that Bitcoin has proven its resilience, institutions are no longer turning away.
The approval of spot Bitcoin ETF funds in the U.S. in January 2024 marked a significant turning point. No longer confined to cryptocurrency platforms, Bitcoin can now be held through brokerage firms, pension funds, and even insurance products.
The wave of acceptance from institutions not only increases Bitcoin's value but also shapes it within the global economy. Lower volatility, stronger infrastructure, and easier accessibility are allowing Bitcoin to evolve from a fringe savings tool into a functional store of value, and ultimately, to become a usable medium of exchange.
Big money brings stability
Institutional capital operates differently from individual investor capital. While individual investors often react emotionally—selling when prices drop or rushing in when prices rise—larger institutions tend to act with a longer-term vision. This behavior has started to stabilize Bitcoin's market cycles.
The flow of spot ETF funds reflects this shift. Since their launch at the beginning of 2024, Bitcoin ETFs in the U.S. have routinely recorded net inflows during price corrections, with funds like BlackRock's IBIT absorbing capital while individual investor sentiment becomes cautious. However, February–March 2025 was an exception: Political uncertainty and concerns over tariffs led to widespread capital outflows, including Bitcoin. Nevertheless, overall, institutions tend to average into price declines rather than panic sell.
Data on volatility confirms this trend: Bitcoin's 30-day volatility has significantly decreased during the 2023–2026 cycle, perhaps due to the stabilizing effect of spot BTC ETFs. While the 2019–2022 cycle saw multiple spikes above 100%, peaking at 158%, the current cycle has been markedly calmer. Since the beginning of 2024, volatility has hovered around 50% and recently dropped to just 35%, comparable to the S&P 500 (22%) and gold (16%).
Lower volatility not only calms investor sentiment but also improves Bitcoin's usability as a medium of exchange. Traders, payment service providers, and users all benefit from predictable pricing. Although on-chain data still shows that most Bitcoin activity is driven by holding and speculation, a more stable price could encourage broader transactional use.
Will large capital drive Bitcoin adoption?
The institutionalization is also driving Bitcoin adoption by making it more accessible to the public. Individual and corporate investors who cannot or do not want to self-manage BTC can now access it through familiar traditional investment products.
In the past 18 months, spot Bitcoin ETFs in the U.S. have accumulated over $143 billion in assets under management (AUM). Although the majority of this AUM is held by individual investors, institutional participation is rapidly increasing through investment advisors, hedge funds, pension funds, and other professional asset managers. As these entities begin to provide access to Bitcoin for their clients and shareholders, adoption will spread.
Ric Edelman, co-founder of Edelman Financial Engines—a $293 billion RIA (registered investment advisor) ranked number one in the U.S. by Barron’s—has recently garnered attention with his updated cryptocurrency allocation guidance.
In what Eric Balchunas of Bloomberg calls 'the strongest endorsement from the TradFi world for cryptocurrency since Larry Fink,' Edelman advises conservative investors to hold at least 10% in cryptocurrency, 25% for moderate investors, and up to 40% for aggressive investors. His reasoning is simple: 'Owning cryptocurrency is no longer a speculative position; failing to do so is speculative.'
With investment advisors currently managing over $146 trillion in AUM, the potential demand for Bitcoin is enormous. Even a 'moderate' allocation of 10% would represent $14.6 trillion in potential inflows—an increase of 330% over Bitcoin's current market cap of $3.4 trillion. A more cautious 1% shift would still inject over $1.4 trillion—enough to structurally revalue the market.
Pension funds, managing a total of $34 trillion, are also slowly getting involved. Pension funds in the states of Wisconsin and Indiana in the U.S. have announced direct investments in spot ETFs. These moves are significant: As Bitcoin becomes an item in pension portfolios, psychological barriers and processes for participation will crumble.
The institutionalization of Bitcoin is not just a story of Wall Street acceptance. It is a shift in Bitcoin's role—from a speculative rebel to an alternative financial system.
However, this evolution comes with trade-offs. Concentration, custody risk, and increasing regulatory influence may undermine the very independence that has given Bitcoin its value from the start. The forces driving adoption may ultimately challenge the limits of Bitcoin's decentralization.