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.
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.