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We haven't seen a massive crypto price drop like we recently did in a long time, and we could see more volatility from major cryptos like bitcoin (BITCOMP) and ethereum (ETH-X). But that hasn't thrown any cold water on my outlook. The digital asset market, as a whole, will continue to rally higher over time.

Because we're starting to see cryptos – big and small ones alike – fulfill their "main mission," a.k.a. their intended purpose to replace fiat paper. More and more, people are coming around. Importantly, institutions are too. One of the country's biggest bankers just said as much.

The Future of Money Is Digital

Last weekend, Tony McLaughlin, managing director of transaction banking at Citigroup Inc.'s (C) "mega-bank," Citibank, spoke at the Finnovex Virtual Summit. The whole reason for the meet-up, involving the top minds in banking and finance, was exploring innovative solutions and improvements for banking – very tech-heavy.

McLaughlin spoke on "Embracing Big Data, Robotic Process Automation (RPA), Machine Learning, Internet of Things (IoT), and Blockchain." That's what got my attention.

McLaughlin said essentially that the microcurrency model is more efficient, faster, and cheaper than the current model we "live in." Just a few days ago, I mentioned the Bank of England's Sir Jon Cunliffe said more or less the same thing. In a nutshell, that means huge players in the field of commercial banking and national finance – central banking – are getting on the same page as us when it comes to the potential of the blockchain and cryptocurrency.

Back to McLaughlin's talk. He said, "Potentially, a world of tokens is more programmable than a world of traditional, siloed financial infrastructure… Token infrastructures are always on, and the traditional financial system clearly is not."

He's onto something – the fact that crypto and the blockchain can run 24/7/365 is a huge disruptor. The fact that human errors don't really enter into it is a plus, too. I can remember a time when you'd have to wait until Monday to address a banking error – sometimes even in-person.

So, bankers of all kinds are warming up to crypto – that's bullish enough. But Wall Street's loading up on crypto, too, specifically bitcoin. That's where I think the serious profit potential is right now.

Hedge Funds Have Doubled Down on Bitcoin

PricewaterhouseCoopers (PwC) recently did a study that revealed digital assets under management doubled in 2020. Cryptocurrency hedge funds have come into their own.

Over 90% of "digital hedge funds" trade in bitcoin, and 67% trade in ethereum. 34% trade in Litecoin (LTC-X), 30% in Chainlink (LINK-X), and 28% trade Polkadot.

What's more, PwC discovered that 56% of microcurrency hedge funds trade derivatives, and even short-sell digital coins. These groups are also staking, lending, and borrowing these cryptocurrencies.

That suggests levels of liquidity are much, much higher than the crypto-bears or mainstream media would have you believe. No doubt, we saw prices drop recently, but the selling and rallying – which can be tough, particularly the selling – just goes to show that cryptocurrencies, even the small ones, are a liquid, legitimate investment vehicle with a bright future ahead of them.