Whether the cryptocurrency market is going through a bull or a bear, all eyes are often set on the institutional investors and the if’s, when’s of there joining the ecosystem. 2018 did see some promising institutional investors incline towards the industry, which has the industry hoping for a bigger, brighter, better future in 2019.
A major chunk of investors still remains skeptical about cryptocurrency markets, majorly due to the lack of a standard regulatory framework and high volatility of digital assets. However, things are changing as big players have started to explore the possibilities and benefits of Blockchain technology and cryptocurrencies.
In the words of the co-founder of Persona, Stefan Neagu, Bitcoin (BTC) has triggered the interest of many institutional investors:
“Bitcoin (BTC) has attracted a lot of big time players in the market. Institutional investors view BTC as an investment instrument. This made the cryptocurrency market more credible. It is no longer a playground for speculators but a sandbox of a group of individuals who are willing to transfer money from the real economy to the cryptocurrency market.”
A vote of thanks to the over the counter trading in 2018, that invited and encouraged institutional investors to penetrate the market. Many major cryptocurrency exchanges like eToro and Coinbase launched OTC options for institutional buyers. It seems their efforts did pay off, as illustrated by a recently released research that, traditional investors are shifting to over-the-counter BTC markets.
Cryptocurrency Regulations For Institutional Investors
The key issue that institutional investors have with the ecosystem is that do not want to get into trouble with the regulatory watchdogs by getting involved. Most economies across the world have had a stern attitude towards cryptocurrencies.
Hong Kong is amongst the few that have set clear and flexible regulations for the institutional investors in the industry. The Security and Futures Commission in Hong Kong, SFC, has set new rules that limit cryptocurrency trading of institutions. For instance, if a portfolio manager or fund intends to invest more than 10% of its holdings in cryptocurrencies, it must obtain a license. Which implies that only
qualified institutional investors can invest in cryptocurrency portfolios.
Another major factor is the nonavailability of custody options. Custody reduces the risk of theft attached to investing in digital assets. If and when an established custodian offers to back the industry, the institutional investors could comfortably maneuver the market.
Understanding the situation, many firms including some of the major banks, launched custody platforms that will enable investors to secure digital assets. Where Intercontinental Exchange’s Bakkt will prepping up its BTC exchange future
as soon as possible, Nasdaq
will be offering a similar instrument in Q1.
Banking giants like Goldman Sachs
, JPMorgan, and the Bank of New York Mellon have been exploring custody solutions for digital assets. As and when these solutions are launched, the cryptocurrency ecosystem is bound to gain interest from the institutional investors.