The cryptocurrency market in 2018: institutional investors will soon enter en masse
Despite fluctuations in the exchange rate of bitcoin and altcoins, the market’s total capitalization is many billions of US dollars. More specifically, $315 billion (at the time this article was written).
At the same time, the whole field has only begun its evolutionary path, and it is growing largely due to private, rather than institutional, investors. The fact that private investors are dominating the cryptocurrency business was specifically reported by The Wall Street Journal . Journalists studied data from the U.S. Commodity Futures Trading Commission and found that banks and other institutional investors are not yet active in cryptocurrency exchanges.
Be that as it may, the number of users on cryptocurrency exchanges is growing every day. For example, Binance has about 250,000 customers. Kraken representatives recently announced that the exchange is gaining about 50,000 new accounts a day. Some companies have even suspended new user registrations to prepare for further growth and restructure their databases. Such exchanges include Binance, Bitfinex, CEX.io, and others.
All roads lead to cryptocurrencies
Still, financial and banking organizations are paying more attention to cryptocurrency. In particular, hedge funds are showing great interest as they invest more and more money in bitcoin-related projects.
According to Saxo Bank experts, funding for cryptocurrency funds may grow by 1500% in 2018. The fact is that cryptocurrency assets are currently outperforming traditional financial assets. Accordingly, this new area is attracting large organizations. Now more than 100 funds work with cryptocurrencies , including Altana Digital Currency Fund, Silver 8 Partners, Market Neutral Liquidity SP-Institutional Fund (MNL), and others.
In an interview with the Financial Times, the president of Hedge Fund Research, Kenneth Haynes, said that investor interest in funds dealing with blockchain technologies and cryptocurrencies has grown sharply in recent months. Hedge Fund Research has even developed two new indexes: the HFR Blockchain Composite Index and the HFR Cryptocurrency Index. At present, these are the first cryptocurrency indexes positioned as an effective investment instrument for hedge funds in this sphere.
Even cryptoskeptics are beginning to show interest in bitcoins. One of them is J.P. Morgan Chase CEO James Dimon. In 2017, he called bitcoin a “fraud,” but in 2018 he said that he regrets his words. Additionally, in an interview with CNBC, he said that he considers blockchain to be “real”. In October of last year, J.P. Morgan Chase announced the launch of a blockchain system that should “significantly reduce” the number of participants required to verify international payments, which will reduce the time required to execute such transactions to a few hours.
Various financial and banking organizations work with blockchain and altcoins. For example, MoneyGram, the largest payment system, signed a contract to test Ripple tokens as a means of conducting digital transactions. Obviously, investors could not miss such news, and Ripple immediately increased 25%.
Institutional investments are already on the way
In addition to J.P. Morgan Chase, other major companies are interested in the cryptocurrency market. For example, Goldman Sachs in October of last year began exploring the possibility of creating products based on bitcoins. The bank may not have done this on its own, but in an interview with The Wall Street Journal a bank representative reported that the market research began due to customers’ significant interest in digital currencies. It turns out that the private investors mentioned above are encouraging institutional investors to enter the cryptocurrency arena. And this means that soon the world’s largest financial and banking organizations will invest considerable money, further expanding the market for digital coins and significantly impacting their value.
According to Morgan Stanley, in 2017 various hedge funds invested about $2 billion in cryptocurrency assets. This is only a small fraction of what institutional clients could actually invest in cryptocurrency. Moreover, the invested billions have been recouped many times over, because most cryptocurrencies have increased significantly in price.
The digital coin market is still highly volatile, but it reacts far less to negative news than before. This makes it possible to hope for bitcoin and altcoin to strengthen further as institutional clients, placated by the stability of crypto-coins, enter the market.
In general, one can confidently say that private investors will induce an increasing number of institutional clients to enter the cryptocurrency market, bringing with them huge amounts of fiat money, and strengthening digital coins and the market as a whole.
More about Qurrex: