The narrative in 2018 had greatly been that it is only a matter of time when institutional investors step in the ecosystem which will drive up the demand and the value of cryptocurrencies. However, the moment has not arrived and not likely to do so anytime soon. And this might be a good thing.
Last year, reports emerged that George Soros and the Rockefeller family were beginning to take positions in the emergent crypto asset class.
The family’s $26 billion Soros Fund Management was supposedly considering trading digital assets. The Rockefeller family’s VC arm, Venrock, decided to take a different approach by partnering with Coinfund to assist entrepreneurs in launching blockchain businesses.
Mike Novogratz, the chief executive officer of Galaxy Investment Partners, said he sees Q1 and Q2 2019 as a period when more institutions will start to come into crypto. Stefan Neagu, the co-founder of digital identity management system Persona, said:
“BTC attracted large players, as the institutional investors saw BTC as an investment instrument. This helped the crypto market because it was not a playground anymore, but rather the sandbox of a limited group of people with money from a real economy being shifted to the crypto market.”
In a report by KPMG dubbed ‘Institutionalization of Cryptoassets,’ focuses on why and how institutional investors should enter cryptocurrency, along with “challenges” the process faces and under what circumstances crypto could become a “full-fledged asset class.”
“Cryptoassets have potential. But for them to realize this potential, institutionalization is needed,” the report’s authors argue, continuing:
“Institutionalization is the at-scale participation in the crypto market of banks, broker-dealers, exchanges, payment providers, fintechs, and other entities in the global financial services ecosystem. We believe this is a necessary next step for crypto to create trust and scale.”
In an article by BitcoinExchangeGuide titled: “Is the Glass Half Full or Empty for Bitcoin and Institutional Investments: More Harm Than Help?”; the author argues that there is both a good side and a bad side to this change.
On one hand, it is clear that more investments will most likely boost prices for cryptocurrency in the short-term, even if just by the fact that they are now associated with it. However, the new investments coming into the market are still the “enemy” that cryptocurrency was originally created to eliminate.
If an investor involved in the cryptocurrency industry is looking forward to traditional finance sneaking in, maybe they should consider how loyal they really are.
Even Satoshi’s vision was never to have institutional players come into the system, but to give power to the masses. For the same reason, he had never mentioned the words enterprise or institutions in his WhitePaper.