Many cryptocurrency investors claim that the next bull market will be driven by institutions.
However, as of now, institutions do not seem to have a significant impact on the cryptocurrency market.
The institutions that enter the bitcoin market are still a minority
For example, BlockFi released a report earlier this month saying that there are currently 201 private funds in the United States with cryptocurrencies. The "cryptocurrency virus" is indeed spreading, but so far it has only infected 1.3% of the total private fund population. .
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And these 201 institutions can be divided into three different parts:
- Traditional hedge funds that invest in cryptocurrencies or related transactions;
- Direct investment in cryptocurrency and ICO cryptocurrency funds;
- Investing in cryptocurrency companies' venture funds (VCs), sometimes they also invest part of their money in cryptocurrencies;
It is reported that the total assets of this "club" management is about 286 billion US dollars, assuming that only 1% of the funds are invested in the cryptocurrency market (Note: the estimation method comes from BlockFi), then the traditional hedge fund funds currently invested in the cryptocurrency field For $2.5 billion, in addition to risk funds, market makers, family financial offices, ultra-high-net-worth individuals, sovereign wealth funds, overseas funds, etc., a total of at least $3.5 billion in traditional fund funds may have entered encryption. The currency field.
Recently, VC investment company CryptoOracle held a conference call with four VC investors: Matthew Welsh of Castle Island Ventures, Matthew Le Merle of Blockchain Coinvestors, Eli Mizroch of Silver Castle Digital Currency Investment Group, and Ikigai Asset Management Travis Kling.
These investors come from all over the world, and they all expressed their opinions on the topic of institutions participating in Bitcoin and cryptocurrency. CryptoOracle partner Lou Kerner concluded after the conference call:
“Although all the speakers are somewhat blind and optimistic, their views are measured and they are aware of the challenges of the future. Their consensus is that institutional investors are entering this market, but it will take more than a year from a large scale. time."
They believe that the necessary conditions for the influx of institutions are “three mature infrastructures”: qualified custody, regulated spot exchanges and futures exchanges, and robust data providers of institutional size.
Currently, the cryptocurrency market does have institutional-level solutions for the above three infrastructures, but according to Kerner, these are still not enough, pointing out:
“Clear supervision of the Securities and Exchange Commission is necessary for regulatory issues, and for exchanges, it is necessary to monitor sharing agreements and provide mature settlement services.”
The institutions are on the way…
Although institutions have not yet explored Bitcoin on a large scale, there is evidence that they are becoming more and more active.
Just last week, the leading cryptocurrency investment service provider Grayscale (Grayscale) revealed that the company's products hit a quarterly high, attracting $254.9 million in three months. Interestingly, most of these funds flowing into the cryptocurrency market come from institutional investors. According to the report, in fact, about 84% of the funds are from institutional investors (mainly dominated by hedge funds).
Grayscale is not the only cryptocurrency channel for institutional investors. Bakkt, once considered a "bull engine," launched its physical delivery bitcoin futures in September.
When talking to analyst PlanB, he commented:
“Bakkt offers investors another way to sell their investment targets. This is another export, and if I am not sure if I can sell the investment target at a reasonable market price, then I will never buy it. ”
In addition, the heavyweight investment institution Fidelity has just revealed that it has begun to increase its investment in the cryptocurrency business. The report quoted Fidelity CEO Abigail Johnson as saying that Fidelity established the cryptocurrency division at the end of 2018, which is currently rolling out digital asset custody and trading services. The investment management giant is currently managing about $2.4 trillion in assets.
Although the institutions are accelerating their entry, the pioneers of Bitcoin are still retail investors.
It is true that there will be a lot of attention to institutional participants, but in the revolutionary industry of cryptocurrency, institutions do not seem to be dominant. According to Kerner, he believes that most of Bitcoin's growth is based on retail investors, and he even said that the so-called institutions will be followers of this market, not pioneers.
In fact, over the past decade, most of Bitcoin's growth (from $0 to $20,000) has been driven by retail investors, password punks, early adopters, venture capitalists, and other non-institutional organizations.
What do you think?