Big players entering crypto — what’s the impact?
By Olga Grinina
Is the year of 2018 going to be the year of investment in crypto and blockchain becoming larger than life? Well, with the news of the likes of Ripple being adopted into major banking systems, that doesn’t seem to be a mere speculation. However, it appears that trials and tribulations of the market making it go from green to red in a matter of seconds are not going away any time soon. The ongoing tightening of regulation and a major crackdown on crypto exchanges might be the factors to deter cautious investors. Curiously though, it feels like this is exactly the time when big financial players are finally making their entrance into the space. Last week the news about the Big 4 and George Soros stepping into crypto started to spring up in the headlines. The funny part is that it wasn’t long ago that calling cryptocurrencies ‘a mere bubble’ was common for the majority of creme-de-la-creme in finance. So the question now is whether this rapid emergence a blessing or a curse for the crypto market and its ultimate impact.
Financial magnates like George Soros and Mike Novogratz and their derivative entities are all familiar names to those in the loop of global financial markets. Setting the example of both successful asset management and trendsetting, these sharks are rarely wrong when making an investment decision. This week news feeds feature Soros seeking to start trading cryptocurrencies and other digital assets. Other instances include the initiative of Passport Capital led by John Burbank to invest no less than $150 million into a crypto hedge fund. Another multi-millionaire Alan Howard is seeking to invest a significant amount of his own money — some of which he actually made last year by investing in crypto — into blockchain-powered projects and digital assets. An exciting detail here is that Soros, for instance, has, in fact, kept an eye on crypto for quite a while: back in the summer last year his online retailer became one of the first to accept BTC as means of payment. Another ‘wolf’ who is not likely to miss out on the opportunity ‘to make some doe’, is dipping his toe into crypto as well. Not only did he start a cryptocurrency merchant bank, but also raised a staggering $250 million for his cryptocurrency effort earlier this year. Mike is about to engage in multiple crypto-related activities like trading, making principal investments, managing assets and also giving advice on blockchain-related ventures.
Speaking of institutional investors, a lot of those in the know estimate that institutional investors were indeed long waiting for a good moment to burst into the seductive sea of XXX profits of crypto. And so they did over the last month when BTC price started to go under correction: isn’t BTC fluctuating between green and red and altcoins ultimately going down the sign of some major market disturbance? Overall, with institutional money influx, digital currency values are sure to receive a significant boost. And as blockchain adoption grows, so as the institutional investment in the market. Goldman Sachs, for instance, is considering introducing their own BTC related investment product counting huge profits as we speak.
Besides institutional investors and business sharks, crypto and ICO industry has sparked the attention of another adjacent field — consultancy. But here the impact of The Big 4 appears to be purely positive. With ICO gaining a bad reputation due to the notorious amount of scams, now with the help of lawyers and auditors, it looks like there is a good chance for cleaning up. They are however still a little bit cautious, yet have recently started offering services specializing in ICOs. And their concerns are pretty fair: the risk of being dragged into scandal throwing a shadow onto highly-valued reputation makes the stakes high. That’s why according to KPMG spokesperson they are still carefully assessing each offering and role in the process.
Traditional startup fuel — venture capitalists — are also expressing the interest. Here the whole concept of venture financing is in a way re-written with ICOs actually reinventing how entrepreneurs bring innovations to market. But even though venture investment in the industry looks particularly risky, it doesn’t seem to stop the venture investors. It is estimated that USD volume investment in blockchain-adjacent startups is to surpass the 2017 numbers. Among the mainstream, investors are the likes of Andreessen Horowitz, but also many of those who look at blockchain as their specific focus of interest: Digital Currency Group, Blockchain Capital, Node Capital, Medici Ventures, Digital Finance Group and Polychain Capital. Curiously, the countries prevailing in the fundraising activities are those where crypto and ICO regulation is rather tight — like the US and Japan. Others with a milder ecosystem, however, are coming up second with Switzerland and Singapore. The trend is, however, is that the majority of investors would be choosing to locate themselves in countries with friendlier regulation environment toward blockchain and cryptocurrency innovation.
Crypto market becoming more structured and organized is surely a good thing. With big money come not only bigger opportunities, but also the increase of trust level to crypto from conventional circles like the governments and regulators. Big money, however, might also bring big trouble. Hence, bigger money needs stricter regulation, which is something the crypto community is not particularly enthusiastic about. And if tighter regulation and higher entrance threshold is the price for the crypto market going mainstream, well, it’s gotta be worth it.