While the world was expecting the Bitcoin ETF to be a doorway for institutional money to come into the cryptos it seems like institutional have found their way despite the uncertain that looms of the BTC ETF. Well a recent OTC Trade Data Shows Institutional Investors Now Dominate Bitcoin Markets with High Volume Trades
Institutional Investors Are Using Back Door for Crypto Buys as regulations still a hurdle
While the majority of eyeballs were on BTC ETF for big money to come into cryptos, institutions investors seem to have found their way to be involved in the $220 billion cryptocurrency market. According to Bobby Cho, global head of trading at Cumberland which is a Chicago-based cryptocurrency trading unit of DRW Holdings LLC that handles the over-the-counter purchases was quoted by Bloomberg saying that institutional buyers such as hedge funds have replaced high-net-worth individuals and have claimed the top spot as biggest buyers of digital coins. The investment sizes, according to Cho, for these large chunks of cryptocurrencies that these institutions are would be worth more than $100,000 through private transactions.
Speaking to Bloomberg he said: What that’s showing you is the professionalization that’s happening across the board in this space. The Wild West days of crypto are really turning the corner.
The big sellers in this OTC markets who are feeding this institutional crypto demand, according to Bloomberg, block miners, who have begun scheduling regular coin sales instead of holding or waiting to offload them during market rallies. Many of the largest miners have also set up their own liquidity desks and operations.
Another prominent voice from the Crypto OTC markets is that of Jeremy Allaire, the chief executive officer of Boston-based Circle Internet Financial who also shared similar facts. He was quoted saying
“We’ve seen triple-digit growth enrolling in our OTC business, That’s a big growth area.”
Large buyers and sellers like private sales because transactions on exchanges can move coin prices. In a private sale, parties can fix the price in advance, instead of worrying about a sudden plunge or spike just as the transaction takes place.
Another reason and probably one of the biggest reason’s institutions are buying coins outside the exchanges is that there are often not as many coins offered for sale as the institutional buyers would like to buy, according to Sam Doctor, managing director and head of data science research at Fundstrat Global Advisers. According to Doctor who was quoted saying:
“At this point in time, because more and more institutions are beginning to enter the market, there’s more of an imbalance, that’s why brokerage firms are springing up to help institutional buyers find inventory,” he said.
Experts believe Institutions money will flock cryptos in 2019
As the data of OTC market show, that there is an immense demand among institutions for cryptocurrencies, many experts believe 2019 could be the year cryptocurrency markets would see institutional investment in a big way. The reason they believe this is because there is a good development that is taking place on the ground to support institutions and their investment in cryptos. Credible and recognized exchanges operators like the ICE in the US and SIX in Switzerland are starting their crypto operations which would minimize the chance of price manipulation and improve the operational technology of the exchange. Along with the improvement in exchanges, many firms have started offering custody solutions that would safeguard the crypto assets of the institutions. Coinbase, one of the more popular exchanges, has launched custody services by partnering with Electronic Transaction Clearing (ETC), a regulated broker-dealer. ItBit and Xapo have also begun to offer similar services and we expect more to follow. Last but not the least all eyes would still be on SEC to clear the first BTC ETF as according to many sources would in Q1 FY 19.
While the demand for cryptos is picking up among institutions in the OTC market, the framework is being developed for institutional money to flow in cryptocurrencies via exchange route as well. Its only matter of time we will see investors flocking at crypto exchanges as well.
Do you think 2019 would be the year for institutional money to come in cryptos? Do let us know your views on the same.
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Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.