In the future, with the implementations of new custody solutions, the market may see an increased influx of big funds and capital, driving prices up. At the moment, this is one of the most important factors that could affect the virtual currency market in a positive way.
The interest of financial institutions and big enterprises in participating in the market keeps growing. Some of these companies are investing big sums of money in order to recruit talent and set up Bitcoin trading capabilities. Just to mention an example, Goldman Sachs, the global investment bank, started offering clients Bitcoin futures through one of the New York desks.
At the moment, Bitcoin is working in order to solve its scaling issues, but there are still some obstacles that do not allow big institutions to place their money in the cryptocurrency market.
Robert Dykes, explains about this situation:
“Global institutional investors have $130 trillion of assets under management. A tiny slice of that moving into crypto will have a huge positive impact on an industry whose market cap remains under $300 billion dollars.”
But the cryptocurrency industry needs to provide facilities and tools for these investors to start operating in the market. Three of these challenges reported by Dykes are custody services, regulations and trading activities.
As he explains, Custody is by far, the biggest obstacle that delays the entry of financial institutions to the crypto world. There are some places where it is illegal for investment funds with more than $150 million dollars to custody their own assets. In this case, institutions need to work with trusted third-parties, including banks and financial companies.
Then, regulations that are not clear are also an important factor for investors not to place their money in the market. Dykes says that global regulators did not take consistent policies on how to allow innovation and blockchain technology to grow.
Additionally, he says that the cryptocurrency space is fragmented, has poor liquidity, and lacks infrastructure that investors require for high-volume high-frequency trading.
During the last months there have been several measures that may help big investors place their funds in the market. For example, the custody Consortium Komainu, is one of these instruments that try to solve the issues around custody.
Three different companies, Nomura, Ledger and Global Advisors have decided to join efforts and create the Consortium Komainu. As reported by Bloomberg, there are some important banks and enterprises testing these custody services, including: JP Morgan Chase, Bank of New York Mellon Corporation, and Northern Trust Corporation.
Hedge Fund Manager, Kyle Samani, told:
“There are a lot of investors where custodianship was the final barrier. Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital.”
Some experts believe that, in the future, the price of virtual currencies will increase with the help of institutional investors rather than with retail investments. The market has been expanding and there are interested parties in exploring it, but the lack of good services and regulations is delaying these investments.