Cryptocurrency traders have been hoping for the inclusion of institutional money for half of the year, hoping to improve their potential earnings with new fiat options. The Blockchain Expo was held in Amsterdam last week where a Bitcoin news site spoke with the leaders of two exchanges to find out their perception of when, rather than if, institutional investors step up.
On Monday, Bitcoin experienced a bump of 11.14% with crypto assets, which seems to be largely due to Coinbase’s announcement of its custodial crypto service. This service offers consumers cold storage, broker-dealer and reporting services, and a program for client coverage. At the moment, Coinbase is trying to make the deal more appetizing by adding hedge funds and related opportunities. Even though this has given a potentially temporary boost, experts want to know what the effect will be of institutional money coming in and why it has been such a lot time coming.
The first step towards bonding these currencies will be regulation, which many countries are attempting to establish. One of the major concerns is to have a specific framework for their investment opportunities, though hedge funds do not have the same flexibility. Nick Gowan, who is the CEO of the Gibraltar Blockchain Exchange (GBC), commented on Bitcoin’s future.
“[GBX] fundamentally believe that the technology is here to stay,” begins Nick Cowan, on bitcoin. “We fundamentally believe in adoption…particularly institutional, but what will accelerate that, I think, is the implementation of certain regulations: consumer confidence, investor protection, transparency, and those sorts of issues, which, at the moment, have been holding back a number of major players who might come into this market.”
After regulation, comes security. Institutional investors need a stronger level of security that gives them financial solutions, which have to include custodial services. Kimley Kadoche, who is the head of Investor Relations for LGO and is set up to launch their institutional investment exchange, said that those type of investors do not have faith in their infrastructure. For these investors, the market is not properly prepared.
“There’s always an issue with the custodian, KYC procedures are not very safe, and also we’re waiting for the SEC to be fully transparent on what regulation and actions they want to take regarding digital assets,” Kadoche said.
Gowan remains confident about the institutional money that is hopefully standing by. However, he also says,
“there are concerns about not just the asset, it’s the custody of these things that has to be addressed for institutions to be able to say, ‘Okay, now we are happy and can come in.’ The approach that Coinbase has taken to custodial security is to provide cold storage of broker funds.”
The third step to consider is liquidity. Institutional traders want to make big purchases, and many cryptocurrencies do not have the right amount of fiat currency to back up their investments. Big names like Bitcoin and Ethereum have the greatest likelihood of liquidity, but a large contribution makes a major wave in the crypto pools. Kimley commented,
“Financial institutions are going to be buying and selling big quantities and they need to have a seller or buyer of them to face them. So, you need to be able to provide them what they want. You can’t just go on Coinbase and buy 1,000 bitcoins. Right now, there’s a latency problem and slippage.”
The fourth step is up for debate, with both Kadoche and Cowan believing that the use of another Bitcoin moon mission could motivate the crypto economy, though neither seem drawn to the idea. They want to focus on the long-term trust and change in the market, bringing more people to get involved.
Ultimately, institutional money will not be a “Hail Mary” for the Bitcoin token, but it can help the crypto community to establish stronger roots and more confidence in the potential of the market.