Cryptocurrencies and blockchain have entered the mainstream and this is no more a secret. Bitcoin has become a subject of fervent discussion among financial practitioners and the space has also seen the entry of a lot of institutional investors in recent times.
In fact, many major financial institutions like JP Morgan have also started entering the market with their own blockchain platforms and solutions; JP Morgan created its JPMC Blockchain Center of Excellence (BCOE) in 2015 to help develop blockchain solutions.
Binance CEO Changpeng Zhao [CZ], in a recent interview, had noted that a large number of institutional investors are willing to enter the digital currency industry, despite the regulatory uncertainty surrounding it. However, one of the major challenges that pose a roadblock for institutional investors is regulations and the high volatility of digital currencies.
Michael Sonnenshein, Managing Director of Grayscale, had opined recently that cryptocurrencies could further benefit from more institutional investors and legacy entities in the space as liquidity increases.
“If you look at the digital currency landscape as a whole, now being US$100 billion to US$200 billion in total as an asset class, that’s pretty small when you compare it to the market caps of other asset classes,” he noted, adding that more capital will help raise awareness and draw in larger investors.
CBOE Global Markets and the CME Group are also among the major institutional investors dipping their hands in crypto-markets. In fact, the average daily Open Interest (OI) of CME Bitcoin Futures increased from just 538 Bitcoin contracts in December of 2017 to nearly 6,000 BTC contracts in February of 2020.
Interestingly, a recent Fidelity Investments survey, with over 400 participants [pensions, hedge funds, and financial advisors], had provided evidence of institutional investors’ stance on cryptocurrencies as an asset class. 47% of the respondents believed that digital assets are an “innovative technology play” and that they would like to invest in crypto-assets because of their “low correlation” to other assets.
Cryptocurrency analyst and ex-Wall Street trader Tone Vays had also opined that he does see more family offices looking to buy Bitcoin for the longer term, adding that institutional investors should and will mostly only be attracted to Bitcoin.
“I do worry about traditional traders and traditional bank infrastructure components, cause you see the attraction of people wanting to go towards the faster moving items or ones that are more integrated to their current lives and crypto solves that problem for me.”