by M. Hasan
“This is the year that institutional money will come into the cryptocurrency market, thanks to the development of trading infrastructure.” – Tabb Group.
“If 2017 was the year cryptocurrencies went mainstream, then 2018 is certainly shaping up to be the year they go institutional,” the capital markets research and consulting firm said in a report by senior analyst Monica Summerville and colleagues.
Cryptocurrency investors have been waiting for institutional money to come into the market. Many expected the launch of Bitcoin futures on major US exchanges in December 2017 would have helped, but Bitcoin has lost more than half its value since then.
The market capitalization of all cryptocurrencies has halved from $800 billion in January 2018 to around $400 billion this month, according to CoinMarketCap.
Will institutional money cause a new price surge?
For me, Bitcoin’s main point of interest has always been that it is the first practical application of blockchain technology which is predicted to have revolutionary applications in many fields.
However, in the almost 10 years it has existed, we can’t ignore the feature which causes the most excitement: its tendency to rapidly appreciate in value to levels that now appear stratospheric.
Bitcoin’s first official valuation is generally accepted to have taken place in 2010 when 10,000 of them were swapped for two pizzas. With that in mind, assertions made, such Bitcoin being the fastest appreciating asset in the recorded history of the markets, stop sounding like hyperbole.
Oehman says that, for a year or two now, there has been a growing demand from institutional investors such as family offices representing high net worth individuals, for ways to invest in cryptocurrencies while still being covered by the same protections offered by more traditional markets.
It’s not the only step that Bitcoin and cryptocurrency seem to have taken towards mainstream acceptance in recent days.
“Regulated trading in Bitcoin futures will begin this month on two exchanges, including the world’s biggest futures exchange.” – CME Group.
This means that investors who do not want to be directly exposed to the risks and challenges of buying, securing, and transferring Bitcoins can reap the benefit of rises in price without even going near a private key or an unregulated online exchange.
This represents a challenge unique to cryptocurrency. While you would need a truck to drive off with a billion dollars’ worth of gold, and you’d have to physically move it from wherever it is stored, the same value in Bitcoin could fit onto a micro card or even a slip of paper. And if it was kept on a computer connected to the internet, it could be stolen by hackers halfway across the world should they find a way of breaking into hard drives, tablets, or phones where wallets and passwords are stored.
“We want investors to feel that they are part of this market in as secure a way as possible.”
It’s clear that big money is becoming increasingly interested in Bitcoin, cryptocurrency, and blockchain as assets in their own right, as well as because of the transformative potential of the technology.
Step to the bright future
Though many questions remain surrounding what the impact of institutional investors will have on cryptocurrencies, one thing is certain: investor interest is higher than ever. As the actions of Goldman Sachs and ICE demonstrate, it’s only a matter of time before these high-volume investors become full participants in the cryptocurrency markets.
Institutional investors are setting themselves up to bring significant changes to the market and, when this begins in full force, widespread adoption is sure to follow. Whether they gradually trickle into the market or enter in a sudden rush, it’s time to seriously consider how they will disrupt an already disruptive market. Money managers for pension plans and endowments have been laying the groundwork to invest in cryptocurrencies this year, according to some investors and industry consultants, but they’re still on the sidelines for now. Many are holding off because of volatility, security issues, and headline risks but their vote of confidence could boost struggling Bitcoin prices.
“The word on the street is that significant additional institutional money is being amassed and is waiting for the right conditions to enter the market — and expected to start doing so this year.”
It’s going to be an intеrеѕting уеаr fоr еxсhаngеѕ.