The old adage “The crypto market is not for the faint of heart” was recently on display in full when the industry’s total market cap fell to a relative low of $ 1.75 trillion on September 20, only to make a strong comeback to celebrate. Despite all this volatility, however, demand from institutional investors remains strong, with reports suggesting that the recent big money players continue to “buy off”, especially after ordering. .
To further explain this, a recent CoinShares report revealed that for the last week of September, digital asset investment products generated $ 95 million in inflows of $ 50.2 million and $ 28.9 million, respectively . In fact, inflows into Bitcoin products have skyrocketed 234% on average over the past 30 days from last week.
It is also worth remembering that US investment bank Morgan Stanley has doubled the total number of shares in the Grayscale Bitcoin Trust (GBTC) since April, which became known when the financial giant filed a report to the US Securities and Exchange Commission. ) on 09/27
Finally, investment management giant Ark Invest – led by CEO and crypto investor Cathie Wood – also desperately bought GBTC 8.3 million shares in GBTC.
Institutional needs develop
To get a better idea of how active institutional players are on their crypto exposure, Cointelegraph reached out to Luuk Strijers, Chief Commercial Officer of the Crypto Options Exchange. He stressed that big banks like Morgan Stanley, Citi and Goldman Sachs are starting to offer a wide variety of digital assets to their customers.
“We haven’t seen them operate on offshore derivatives platforms. However, we see Tier 2 companies becoming increasingly active in terms of size, asset managers and hedge funds, either actively investing / trading or as an alternative to hedging their VC investments. “
To back up his claim, he points out that around 20% of Deribit’s option volume is currently traded as over-the-counter blocks, a figure that previously fluctuated between 5% and 10%. “Because of the size of these transactions, which clearly means that the institutional parties are involved, these transactions are better done in a single block than multiple transactions on the screen,” he said.
Finally, Stijers points out that traditional financial institutions prefer trading futures and options over perpetual offers, which are often viewed as the product of a short-term commitment due to the unpredictability of their funding. “Deribit has a higher overt interest in futures than many of our other companies because about 80% of our volume is institutional,” he said.
Play the long game
Elena Sinelnikova, co-founder and CEO of the Ethereum dual-layer scrolling platform Metis, told Cointelegraph that retail investors mostly skip the consolidation phases and only turn their attention to the crypto industry when the market is booming. Institutional investors, on the other hand, know that the best time to stack is when the market is falling and / or standing still, which suggests that they have a longer-term outlook. She speaks:
“We’ve had enough market cycles to know that the kind of pullback we’ve seen in the past few months often comes close to a major uptrend. While no one can predict the future (in crypto or otherwise), institutions use this quiet time to replenish their pockets in anticipation of another big leap. “
Sinelnikova also points out that investors must bear in mind that different market phases can lead to significantly different results. “Watch Bitcoin’s dominance data to see if BTC or altcoins (or both) will drive the next bull market,” she said.
Douglas Horn, chief architect of Telos’ scalability-focused blockchain network, shares a similar perspective, who told Coitnelgraph that institutional investors can be compared to superheroes – meaning they take a lot of time and energy to get them moving, but once they do, it’s hard to stop them. He says:
“Now that you’ve made the decision to get into crypto, you won’t be convinced of any temporary volatility. If anything, they will be less applicable to cryptocurrency accumulation during recessions. When these investors bought their first bitcoin, it must have taken them years to evaluate and plan their goals and objectives. They work very differently than typical cryptocurrency traders and investors. “
Horn said that while all is well, the foundation has been laid by companies like MicroStrategy for others to follow, and that a large number of newer institutional investors are nearing the end of due diligence processes in the digital asset market invest.
Not everyone agrees
Philip Gunwhy, Marketing Director for Blockasset in the NFT Ecosystem, told Cointelegraph that while bitcoin adoption among institutional investors has improved in recent months, some remain cautious, especially as the regulatory environment in this emerging industry continues to heat up. From his perspective:
“Prospective Bitcoin buyers are not a concerted effort by these institutional investors, and therefore it is impossible to say for sure what buying behavior these investors are buying unless they are made public.” Papa. While Morgan Stanley recently doubled its Bitcoin investments, many institutional investors are choosing the venture capital option and capital is flowing into companies that provide Bitcoin-related services. “
Despite Gunwhy’s claims, Wes Levitt, head of strategy at the decentralized video streaming platform Theta, told Cointelegraph that institutional capital is still pouring into the blockchain space, like the amount of funding crypto venture capitalists (VCs) in the first half of 2021 shows over $ 17 billion. He says:
“It is possible that, given direct exposure to BTC / ETH, interest has eased somewhat with the May crash that certainly spoiled many traditional investors, but according to reports, institutional outflows are still positive in September. As always reports.” about crypto deaths. ” are greatly exaggerated. “
Looking forward to something
To get an idea of where institutional crypto adoption is growing, Cointelegraph spoke to Joshua Frank, co-founder and CEO of TheTIE, a provider of cryptanalysis and blockchain. In his view, the demand that his company is seeing from traditional companies is overwhelming.
“There are dozens, if not hundreds, of multi-billion dollar trading firms, hedge funds and other money managers who have made their first crypto trades,” Frank said.
He added that while there have been some well-known announcements about funds investing in crypto, there are many other developments behind the scenes that the public is unaware of. Frank says such operations usually begin simply – i.e.
“We see that these amounts keep falling. We have at least 5-10 customers, the 50-100 largest hedge funds, that are actively setting up crypto pools. That’s all I can say publicly, but these funds are our clients so we’ll see it in real time. “
Finally, according to a recent survey, a growing list of traditional financial institutions is increasingly looking to enter the digital asset trading / investing sector. According to the report, around 62% of global institutional investors with no current exposure to cryptocurrencies have indicated that they want to enter the crypto market within the next 12 months or so.
The survey looked at the views of 50 asset managers and 50 institutional investors from different countries, including the United States, United Kingdom, France, Germany and the United Arab Emirates. “There is no doubt that the crypto-asset market is becoming more mainstream in the institutional and asset management sectors,” the report said.
As the crypto industry continues to evolve – both from an infrastructural and regulatory point of view – it will be interesting to see how the aforementioned trend of increasing institutional acceptance plays out.