Last year saw lots of interest from institutions, who were a part of a hype-drive that supposedly should have ushered Bitcoin and the altcoins out of a prolonged bear market in 2019.
Suddenly, the prospects for institutional investments in the cryptocurrency markets have far more long-reaching effects than the actual application of the blockchain technology itself. It suggested that investors were bored with the cliché of what blockchain is and its potential, and are far more interested in how much they can profit off its underlying asset class.
Institutional investor flux
In preparation for these new class of investors, crypto ventures were adjusting their business infrastructures to accommodate the changes that would ensue from the influx of these sophisticated investors.
Top cryptocurrency exchange by trading volume Binance reportedly added sub-account features; Chicago-based cryptocurrency exchange Seed CX introduced spot trading facility for institutional investors; number one US crypto trading platform Coinbase launched an over-the-counter (OTC) trading platform for institutional clients; Circle’s Poloniex opened up trading services exclusive for institutional clients, and many more strides in the direction of high net-worth investment categories.
Perhaps the most currently notable investment interests for this class of investors include those to be offered by Intercontinental Exchange’s (ICE) Bakkt and Fidelity. The growing interests in these platforms suggest that these products would probably turn the tides for the crypto market upside, as it is perceived that they would offer a fresh inflow of capital and liquidity into the space.
Rewriting the market narrative
Accordingly, when the market crashed in November 2018, falling below the supposed bottom of USD 6,000 at the time, many thought that was the moment for institutional investors to hop in. Still, prices have breached many more speculated bottoms and are currently hovering around USD 3,400; yet, most of these investors have stayed their hands. One question, if these investors could actually change the narrative for the market, what’s stopping them?
Here are a few pointers: liquidity issues, susceptibility to market manipulation, regulation uncertainty, and crypto custody issues. Above all, the right framework may yet be the reason why these investors have not fully immersed themselves.
Moreover, insights provided by John Devlin, chief analyst at P.A.ID suggested that crypto needs to rise above stigma, and also become more regulatory compliant: “According to P.A.ID Strategies, 68% of Bitcoin exchanges across the US, and Europe is not KYC compliant.”
On another note, head of regulatory surveillance and marketplace at Nasdaq Tony Sio told business insider that while lots of exchanges were reaching out for Nasdaq’s SMARTS Trade Surveillance platform, it was however difficult because according to him, as a startup, “it is quite hard to set up because it requires a fair bit of work… [and] probably one of the sticking points”. This would imply that some of these investment propositions to institutions need time to develop and mature before implementing to scale.
Although some of the new projects reportedly claim that they are working diligently to ensure that their final product will meet the standards and expectations of the new class of investors. However, it remains to be seen exactly how the market will play out in the event that these platforms are finally launched.
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