Friday, September 18, 2020

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For some time now, people within the crypto space have been stating that institutional investors are rushing into the crypto arena and looking to trade digital assets.

Following news that Grayscale had traded more than $1 billion in bitcoin during its second quarter, it seems like many other institutional firms have been looking to get a piece of the crypto action.

Institutional Investors Keep Heading for the BTC Hills

In other words, it does look like institutional investors are rushing to get to the front of the digital line. While it wasn’t always like this, institutional players are potentially seeing things in bitcoin that they never have before.

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This represents a huge change for bitcoin and could potentially lead it into much greener pastures. Institutional traders were long thought to have been core ingredients to the development and furthering of the bitcoin space. They were believed to have been necessary for making bitcoin far more mainstream and legitimate, and now it seems like there are plenty of companies looking to stock up on units of the world’s most valuable digital asset.

Kavita Gupta – a scholar at Stanford University – explained in a recent interview:

In the last two years, we have seen traditional pension funds like Fairfax County’s Virginia’s Police Officers Retirement System, traditional banks like JP Morgan, Signature Bank, and multiple billion-dollar family offices across the country holding and investing in bitcoin and other cryptocurrencies.

Prior, institutional traders often claimed that crypto assets were not secure in that they were highly volatile and vulnerable to price swings. This is behavior we’re seeing heavily as of late. The world’s number one cryptocurrency – bitcoin – was trading for over $12,000 just over a week ago. However, at the time of writing, it has fallen into the $9,900 range, meaning it has lost well over $2,000 in a rather short period.

A Growing Presence

Still, despite these fluctuations, firms like the Commodity Futures Trading Commission (CFTC) – one of the toughest regulatory institutions out there – have approved countless bitcoin futures and options products over the past few years. Denis Vinokourov – head of research for digital asset broker Bequant – recently stated:

Options are a rather efficient way to hedge exposure to the underlying product, be that bitcoin or Ethereum spot or even futures/ perpetuals. In addition, it is easier to structure products that would offer ‘yield,’ and it is this that has been particularly appealing to market participants, especially in the wake of sideways market price action.

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