According to a law that came into force on July 1, German Spezial-AIF special funds have been given the right to invest in digital assets. This is a landmark decision that was made based on EU regulations. Thus, huge capital may be introduced to the market.
German special funds and their potential
As many as 4000 entities function on the basis of Special-AIF. The total capital they have in management exceeds 1.8 trillion euro. According to the newly obtained rights, 20% of this capital can also be invested in cryptocurrencies. This kind of diversification will allow for the inflow of about 370 billion euros into the area of digital assets. At the moment the regulations allow investments only in Bitcoin and Ethereum. However, it can be assumed that with time this situation will change. It is hard to imagine that these billions will flow into the crypto market overnight. This process should be progressive. However, it opens up possibilities that these funds have not had so far. With the world’s economic future uncertain in the coming years, it offers the possibility of a broader protection of funds. Managers certainly have this in mind.
The queue of applicants is still growing
German special funds belong to the segment of closed-end funds. This means that the new regulations do not apply to public funds. The Association of Alternative Investments of the German Republic (BAI), which works for the extension of the newly adopted regulations, is making a stronger voice in this matter.
It is also worth noting that the new law in Germany is a result of EU regulations, which the largest European economy decided to adopt first. This means that in the near future other countries of the European Union will have to look at similar regulations. This augurs perhaps a small revolution, as it is not a well-known fact that many EU countries completely ignore the presence of cryptocurrencies, while others are increasingly tightening their friendship with them. EU law within institutional funds may unify the way crypto assets are viewed in the community of European countries.
More and more institutions, means more and more strong capital
Since around mid-2020, we have been constantly hearing about the influx of institutional money into the cryptocurrency market. This process is going strong in the United States of America. However, we do not hear about too many institutions from the area of other continents. Of course, there are exceptions here, but they are a definite minority. The new German law and its inflammatory element in the form of EU regulations have the right to equalize the investment burden between Europe and America. Let’s also remember that most institutions don’t get into cryptocurrencies for a while, but for years. Could this mark the beginning of Bitcoin’s mythical supercycle? We’ll probably find out soon enough.