Institutional Investors are Changing the Face of the Crypto Market: Here’s How
As many of our regular readers may already know, institutional investments within the altcoin market have increased quite substantially since the start of 2018.
However, now with 2019 underway, many experts believe that this newfound interest from big name players will not only support this burgeoning market space but also distort it in some ways.
The Fate Of Crypto In 2019….
Earlier in 2018, it came to light that multi-billionaire George Soros was beginning to take an active interest in cryptocurrencies. Around the same time, it also became apparent that the Rockefeller family via its VC arm, VenRock, too was teaming up with Coinfund so as to help new enterprises launch novel, blockchain based businesses.
With this information in mind, it is worth noting that, Galaxy CEO, Mike Novogratz now believes that by the end of Q1, 2019, more and more institutions “will start to come into crypto”. Not only that, he also believes that by the end of the year, the market as a whole would have come out of its ongoing slump and turned bullish.
Crypto Is No Longer A ‘Fad’
While in years gone by, many investors have brushed off the crypto sector by referring to it via a whole host of demeaning names, it is now all too clear that this unique market space is here to stay. In this regard, Stefan Neagu, co-founder of Persona, was recently quoted as saying:
“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 addition to all this, it is also worth noting that a recent research piece released by Diar shows that institutional cryptocurrency trading on traditional exchanges has been diminishing in volume since there has been a gradual (yet tangible) shift towards OTC trading.
To further elaborate on this point, we can see that during OTC market hours, there has been an increase in BTC trade volume by over 20 percent.
Some Issues Still Persist
Two of the core issues that still exist in relation to cryptocurrencies are their low liquidity and their susceptibility to manipulation. While the entry of big name institutions into this space has definitely helped anchor altcoin prices, the aforementioned problems are still quite tangible.
On the matter, Neagu was quoted as saying:
“I doubt that this [increased institutional investor] interest will cause liquidity issues. I don’t see any reason why the crypto market should be different than the stock market. As for distorting the prices, I don’t think that they would see any big ripples. Let’s remember that the Mt. Gox trustee sold $230 million worth of BTC in four months, and they did it using exchanges, not OTC desks. For the moment, the “weight” of these institutional players is not that big to send the BTC price down.”
Crypto Custody Related Issues Need to Be Solved ASAP
Each and every month we get to hear about some exchange or the other falling victim to a hacking scandal (with the platform’s funds either being lost, stolen or compromised). Thus, if more confidence has to instilled within this domain, something needs to be done about the security side of things.
According to a report released by the Bank of New York Mellon, the past few months have seen an increase in demand for traditional, established custodians for cryptocurrencies. In this regard, Nomura and Intercontinental Exchange have announced plans to explore such offerings.
If recent rumours are to be believed, Coinbase has recently gotten the seal of approval from New York regulators to establish a custodial firm for cryptocurrencies.
This is big news, since in the past, CEO Brian Armstrong has openly stated that due to a lack of security based offerings (within this space), more than $10 Billion worth of investments are simply sitting on the sidelines.