What Is The Role Of Institutional Investors In The Cryptocurrency Market?

What Is The Role Of Institutional Investors In The Cryptocurrency Market?

There’s
no denying that cryptocurrency has been hogging headlines in the financial
world for several years now. The market that started existing 2009 onwards has retail
investors to thank for triggering most of its growth.

On
the other hand, institutional investors have historically chosen to view
cryptocurrencies as a legitimate asset class. Thus, playing a significant role
in the market. But what role are they exactly playing? That’s what we’re going
to find out today.

Ever
since 2017, cryptocurrency exchanges in India and other countries have pushed
for the best Bitcoin app and more inclusive services. Many of
them are exclusively geared toward institutional investors. Therefore, people
today have realized how digital currencies, such as Bitcoin, could be a useful
hedge against the economic and other geopolitical factors.

In
the following sections, we are going to explore the ever-changing dynamics of
institutional investors in the cryptosphere and how the industry is getting
ready for an unprecedented amount of investment.

Moving Institutions
in Cryptocurrency Market

Various
new platforms, as well as services in the crypto sector catering to the
institutional investor swarm, have additionally risen of late, including
traditional asset management firms Fidelity Investments.

In
2018, Fidelity Investments launched a separate organization offering storage
and trading-related services for digital currencies – Fidelity Digital Assets.

In
the meantime, the parent company of the New York Stock Exchange propelled a
Bitcoin futures exchange named Bakkt joining CME Group as well as Cboe Global
Markets that began offering cryptocurrency futures in late 2017.

Ivy
League university endowments have additionally begun to think about investments
in digital currency. As per a 2018 report, Massachusetts Institute of
Technology (MIT), Dartmouth College, Stanford University, Harvard University,
and the University of North Carolina have just made investments in the
cryptocurrency market.

In
2019, there were reports that Harvard University backed a blockchain company,
Blockstack Inc, that boasted an upcoming token sale.

At
last, retail as well as institutional interest in a BTC-based ETF has been
concerning the ascent. The US Securities and Exchange Commission (SEC) has
received over twelve applications for different crypto ETFs up until this
point, including one from Gemini, which is a cryptocurrency exchange backed by
Winklevoss brothers.

Also,
there’s a Bitcoin exchange in India adding more to it with its BTC to INR solutions.

Implications of
Institutional Involvement

It
is believed that the presence of large investors in the market is something
that would make it an attractive investment option that would attract a diverse
pool of investors, ensuring more stability at last. With the increasing demand
of stablecoins, institutional investors too are likely to come up with their
own digital currencies, which is expected to add more to the supply of digital
currency and lessen the potential volatility. Not only this but with the
increased demand comes the promise of expanding returns to the investors,
particularly the earliest of them. Hence, the implication for early investors
seems to be highly positive.

It
is also believed that with the nearness of institutional investors comes
stricter principles of accountability as well as due diligence. The digital
currency markets have seen helpless custodianship with trades getting hacked or
ending up being fake. Hackers reportedly took around $4 billion worth of
digital currency last year. In this unique circumstance, there has been a call
for transparency, and it is accepted that institutions with their reputation to
uphold, catalyze this cycle.

Conclusion

With
everything taken into account, institutions are plainly beginning to heat up to
a future in which digital currencies are an important asset class. Given that
the business was generally included technology enthusiasts and early adopters
just a couple of years prior, the contribution of large institutions paints a
promising picture for the future of digital currency as well as blockchain
technology
.

Finance