If you’ve been keeping up with the ups and downs of the cryptocurrency market this 2018, then you know that one of the prevailing discussions is the interest (or lack of it) of institutional investors to enter the space. It’s ironic that an industry whose most passionate believers are people who want decentralization would have to rely on institutional investors to see tremendous growth. But it’s clear that they hold the key to finally reaching the trillion-dollar mark.
As of October 2018, the cryptocurrency market has a total market capitalization of $200 billion. This only amounts to 25% of the all-time high of $800 billion back in January. It was during that time when countless retail investors and small hedge funds entered the market, increasing the demand for Bitcoin and other digital coins. Unsurprisingly, this caused prices to shoot through the roof, with Bitcoin reaching $19,000 in December 2017. Mainstream media shared news every day about how some Bitcoin investors managed to gain 10,000% returns, prompting ordinary folks to put their money in the market.
The current prices are minuscule compared to their peak. Many investors and speculators thought that the run-up in prices will carry over to this year, but the overall market has taken a massive nosedive. Those who are responsible for driving up prices in December are also the ones who caused prices to plummet sharply after deciding to withdraw their earnings.
Fortunately, a slew of cryptocurrency investors still looks on the bright side, believing that it’s only a matter of time before digital coins will reign supreme and trump fiat money. Retail investors are eager to hold onto their digital assets. They’re also adamant about using cryptocurrency trading program to continue raking in profits despite the relative tamer price volatility. In one Bitcoin Loophole Review, investors can add an effective tool in their trading arsenal, allowing them to use analytics and Big Data to make informed decisions.
For people who genuinely believe in cryptocurrencies, today’s prices seem like a bargain. Institutional investors, however, remain skeptical about entering the market. They continue to sit on the sidelines and raise their eyebrows on the different issues that come with investing in crypto. The list includes lack of liquidity, regulatory uncertainty, and price volatility. Addressing these problems hold the key to getting an infusion of capital from banks, endowments, and pensions to hit the market.
As of the moment, it appears that institutional investors will reap higher returns by putting their money into companies that will deploy and profit from utilizing blockchain technology. They have yet to find a reason to invest in digital tokens themselves. The fact that investing in crypto mostly requires using small and unregulated exchanges doesn’t entice smart money to flow into the crypto space.
Additionally, institutions have yet to find a way to lock in their crypto returns. Asset managers, for instance, need to guarantee profits and hedge against losses. This only makes sense since they’re legally obligated to act in the best interests of their clients.
The recent rejection of Bitcoin ETFs doesn’t come as a surprise to many, even institutional investors themselves. There needs to be a solid structure through which smart money can enter the market while providing a way for institutional investors to feel safe about managing gains and losses. Only then will we see large institutions flood the marketplace and perhaps push the market capitalization to more than $1 trillion.