Regulatory Clarity is Top Driver for Institutional Crypto Investment: eToro Report
A new report explains that institutions will need to see regulatory and technical developments before increasing their crypto commitments.
With their role in propping the crypto industry up last year, many have wondered whether institutional investors will make bigger commitments to digital assets this year.
The general belief is optimistic, with many industry experts counting on these investors to move into the crypto space en masse. eToro, the crypto-friendly stock trading app, is providing some context as to what could spur this drive.
Apply Fixes First
Recently, eToro published a report citing possible hindrances to increased institutional crypto investment this year. Published in collaboration with investment advisory firm Aite Group, the report involved interviews with 25 institutional crypto players.
The report explains that most institutional crypto investment last year came from companies’ desire to hedge against inflation and the weakening dollar.
However, even now that the market appears to be maturing, many investors remain unconvinced about its long-term potential. The report particularly explained that institutions would like to see more regulatory clarity, an improved market infrastructure, and greater security measures from asset custodians.
Other requirements for increased institutional investment include a “standardized global regulatory regime” and a reliable market infrastructure to assure wary investors about regulations in their regions. Some survey participants also noted technical complexity – especially with the risks of storing private keys. Tomer Niv, eToro’s Head of Business Development, said,
“It’s encouraging to see that the next phase of the crypto industry’s evolution is underway with more participation from institutions […] More needs to be done from a market infrastructure point of view to make this group of investors feel comfortable joining the crypto ecosystem.”
The partners pointed out that institutional crypto investment will be required to take the market even higher, with the potential of bringing the crypto industry to a $2 trillion market cap. Considering that institutions were vital in bringing the market past the trillion-dollar mark in the first place, this is understandable.
Still in Its Early Stages
While eToro and Aite Group are striking a more cautionary tone, other crypto insiders have been much more bullish about the chances of increased institutional crypto investment.
Head of crypto merchant bank Galaxy Digital Mike Novogratz told Yahoo! Finance that he expects a more significant influx of institutions into the market this year alone.
Novogratz’s interview came when Bitcoin had dropped several points after reaching its all-time high of $42,000 per token. As the bank owner explained, institutional investors are monitoring the market more closely and would want to buy dips whenever they see any.
Novogratz explained that family offices, hedge funds, and more have already cited Bitcoin as a means to continue hedging their wealth as the traditional economy claws back from the coronavirus’s impact.
Bitcoin has corrected even further since then, now barely holding onto the $30,000 mark. Going by Novograzt’s predictions, institutions should be gearing up to buy up more of it.