Are Institutional Investors Needed?
The cryptocurrency market has been speculated by self-acclaimed prophets to break out of its range bound cycle in 2019. Particularly as regards the long awaited participation of the institutional investors in the market capitalization of crypto coins and the blockchain technology. While most people maintain the stand that decentralization, on which the technology was built on will be threatened by the inflow of institutional investors, especially as the cryptocurrency world runs on totally different level as regards the traditional investment platforms like stock, bonds and forex. A few people are of the opinion that the participation of institutional investors is needed to tackle the volatility of the market, and the maintain sustainability.
Whichever school of thought you belong, you will agree that the cryptocurrency market runs on the same principles as other businesses, and predicting, or maintaining a particular believe as regards the future of this market is somewhat risky. But allow me acknowledge the trend, by saying that the potential inflow of institutionalized investment machinery into the crypto market is something that cannot be ignored. So we have to accept that at one point or the other, institutional investors will crowd the investment space – if they aren’t in it already. However, institutional investors have been shying away from the market due to its unregulated policies. The truth is that cryptocurrencies are volatile and unstable, hence they create a very wide barrier for new investors. Especially institutional investors.
The emergence of the Bitcoin ETFs (Exchange Traded Funds), coupled with the recent developments in the regulatory regime of the cryptocurrency market has the potentials of catalyzing this participation of institutional investors enter the market. An ETF in its simplest term is a fund that is traded, just like a stock on an exchange. It can track an index, a bond and a commodity. ETFs are great tools for reducing risk, giving investors a wide range of exposure to the markets, thereby establishing themselves as important tools for institutional investors. The Bitcoin ETF was created to eliminate the volatility and instability of the Bitcoin, with the aim of giving new and old investors a good exposure to the huddles of Bitcoin in a familiar, and regulated platform.
Bitcoin ETF Getting Institutional Investors
The past year was saddled with moves to seek the authorization for a ground breaking inclusion of crypto ETF on an exchange platform from SEC. Most experts believe that the approval by SEC, and other relevant exchange power houses will be a quintessential move towards bringing institutional investors into the cryptocurrency market, allowing them to trade and diversify their investment, without necessarily buying the crypto assets. These experts peg their believe on the market capitalization of the United States exchange traded funds market, which experienced a tremendous increase, totaling about 580% in the space of 10 years.
Recently, most attempts by companies to get Bitcoin ETF approved by the SEC have been to no avail, leaving most investors disappointed, as it is somewhat going to be a very good investment when it eventually pulls through. Most people attribute this rejection to being politically motivated, but according to experts, the rejection is centered on the problem of security, and the systems in which these ETF contracts are to be made. Whichever it is though, the determining factor as to if institutional investors will invest in Bitcoin ETF is hinged on the approval of ETFs by SEC. While some analysts are of the believe that an approval will come in 2019, others do not see it being approved in the nearest years.
So, if institutional investors who have plans of investing into the cryptocurrency market aren’t getting their much awaited Bitcoin ETFs and other cryptocurrency ETFs, does that mean that they won’t invest? Actually, a large number of companies are working on cryptocurrency investment products for institutional investors. This is a case of going through the window if the door refuses to open. Companies like eToro which launched an over the counter (OTC) Bitcoin trading platform for institutional investors in mid 2018, and other startup companies in the cryptocurrency sphere have continued to make moves to attracts institutional investors. There is no doubt the approval of Bitcoin ETF by SEC will be a great way to infuse these investors in the market, however, it is not the only way.