Nick Chong · 5 days ago · 2 min read · Insights via Grayscale Investments
Bitcoin › Analysis
Stability in Crypto Market Suggests Massive Accumulation by Institutional Investors
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Most investors in the crypto market are hoping for the entrance of institutional investors to start the next bull run. Recent stability of major digital assets like Bitcoin suggests that institutional investors are already actively involved in the cryptocurrency market.
The past two months from August 2018 to early October 2018 have been the most productive period for the cryptocurrency sector. The market has seen more progress in institutionalization, regulation, and infrastructure improvement within the last 60 days than the past nine years.
To recap, in merely two months, the following events have transpired in the cryptocurrency industry:
- Goldman Sachs clear Bitcoin futures, set to offer crypto custody
- Citigroup expected to offer crypto custodian once approved by regulators
- Morgan Stanley to offer Bitcoin swap trading, already developed infrastructure to serve clients
- The launch of a regulated cryptocurrency exchange Bakkt by NYSE, Microsoft, and Starbucks
- South Korea, Japan, and the US seeing rapid progress in regulation
- $30 Billion brokerage giant TD Ameritrade support the launch of first multi-crypto futures exchange ErisX
- Coinbase and BitGo approved as trusted crypto custodians
Yet, the fast improvement in the infrastructure of the market had little effect on the price of Bitcoin and other major cryptocurrencies. Since Aug. 9, Bitcoin has remained stable in the $6,400 to $6,800 range, apart from one period in mid-September when it briefly broke out of the $7,000 mark.
Institutional Investors are Already Here
It is entirely possible, given the data provided by large over-the-counter (OTC) crypto brokerages and Wall Street research firms, that institutional investors have already entered the crypto market and have started to accumulate massive amounts of crypto in recent months.
Speaking to Bloomberg, Bobby Cho, global head of trading at Cumberland, the Chicago-based cryptocurrency trading unit of DRW Holdings, a firm that handles large buy and sell orders of crypto in the OTC market, stated that the accumulation of crypto by institutional investors led the market to demonstrate a record high level of stability in the past two months. Cho stated:
“One of the biggest criticisms of crypto by institutional investors has been the volatility. Over the last four to six months, the market has been trading in a very tight range, and that seems to be corresponding with traditional financial institutions becoming more comfortable diving into the space”.
He also added that a significant portion of the OTC deals which DRW have processed throughout the past six months were done during Asia hours, suggesting that either miners who are based in Asia are selling large amounts of crypto or buyers from markets like Hong Kong, China, Japan and Singapore are accumulating crypto. Cho added:
“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.”
Cho emphasized that the narrative of “wait until institutional investors enter the market” is no longer relevant because institutional investors have already entered the market.
Danny Kim, head of growth at cryptocurrency trading technology firm SFOX, echoed the sentiment of Cho, explaining that the stability of crypto was created by an influx of new institutional capital he said:
“Before institutional firms were actively trading crypto or heavily involved (before 2018) bitcoin price differences between exchanges varied as high as 4.5%”.
Yale is an Institutional Investor
This week, Yale University, the prestigious Connecticut-based Ivy Leauge college, invested in a crypto fund that raised more than $400 million.
Previously, billionaire investor Mike Novogratz stated that the entrance of pension funds, academic institutions, and large-scale financial companies into the market will trigger FOMO (fear of missing out) amongst institutional investors.
With Yale already invested in the market and OTC volume increasing at an exponential rate, it is difficult to dismiss the claim that institutional investors are already in the crypto market.