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Back in March, the equity and cryptocurrency markets suffered from a coronavirus pandemic-induced crash. However, the incident did not seem to bother institutional investors as they have taken positions in top cryptocurrencies such as Bitcoin (BTC).
A recent report by the crypto exchange Coinbase revealed that institutional investors have lately been busy using the platform to take positions on the cryptocurrency market, according to Bitcoin.com. The exchange noted that there has been a “noticeable uptick in institutional business’s growth” for the first half of 2020.
The trend seems to suggest that more institutional clients are getting comfortable investing in the new asset class. Coinbase noted that the “greater visibility of reputable investors warming up to digital assets” is also sending a positive signal for other investors as it could help inspire “confidence among this community.”
For example, the hedge fund Tudor Investment Corporation disclosed in May that it took positions in Bitcoin (BTC). The announcement also coincided with reports that came out at that time saying the hedge fund’s CEO Paul Tudor Jones argued BTC to be a better hedge against inflation.
Meanwhile, Cointelegraph reported that the maturing crypto derivatives market is one of the reasons that are attracting institutional investors. This is the explanation given by the CEO of derivatives exchange Bybit, Ben Zhou, on why institutional clients have shown increasing interest in the crypto space.
As the Bybit CEO puts it, institutional clients see crypto derivatives as a risk management tool in the cryptocurrency market. “Derivatives markets serve a vital function by contributing to liquidity, providing proper risk management tools and different product options,” Ben Zhou said in an interview on June 29. “Therefore such is how I see the cause and effect when it comes to this topic.”
Investors are also getting more confident in getting their hands into the digital assets thanks to the maturing crypto market. “The confidence of financial institutions also lends a legitimizing sheen and helps people to see crypto more as money. Continuing improvements in the crypto infrastructure will gradually allow people to do more with the cryptocurrencies, which will in turn grant them more inherent value,” Zhou added.
More institutions are likely to enter into the crypto space as regulation becomes clearer. “2020 will be an especially exciting year for the institutional market as compliance and regulation matures,” said Ciara Sun, head of global markets at Huobi Group.
“We are already seeing big Wall Street stalwarts like Tower Research, Renaissance Technologies, and some of the world's top hedge funds publicly announce their entry into the digital asset market,” Sun added. “However, these larger institutions will not trust under-regulated digital asset exchanges, and we are still five years away from market maturity.”
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