Reports are increasingly indicating that bitcoin’s recent drop of 70% from its December record highs of nearly $20,000 has spurred a renewed interest in the BTC and cryptocurrency markets from institutional investors.
Reports Indicate Influx of Institutional Investment
Jeffrey Van de Leemput, an analyst working for Cryptocampus, has attested to the influx of interest from institutional buyers, stating that “serious money is now entering the market for the first time”. Mr. Van de Leemput added that “a couple days ago I helped set up a 200k BTC transaction for Chinese buyers… Soros, etc., are coming in, we will now see the start of the real bubble.”
Olga Feldmeier, the chief executive officer at Smart Valor, predicted that a strong break above the $8,000 USD area is having the potential to comprise “the ignition for the next bull phase, for which a lot of investors were waiting for a long time and will be happy to support now.”
Rich Ross of investment firm Evercore recently reluctantly described bitcoin as an attractive investment, following the early-2018 crash, stating: “As much as it pains me to say this, the chart does look a lot like other highflying stocks that I am buying on this dip.”
The chief investment officer of cryptocurrency hedge fund BlockTower Capital, Ari Paul, recently described widespread institutional investment as an inevitability for cryptocurrencies, saying: “I do think it’s inevitable from a few angles. Even if they never believe in it, as an asset class, they’re smart enough to recognize the alpha opportunity.”
Bitcoin Seen as Attractive Hedge Against Mainstream Markets
Cryptocurrency analyst at Saxo Bank Jacob Pouncey acknowledged that the recent advertising bans and the potential for regulatory action against cryptocurrency pose a threat of further bullish momentum. However, he also stated that “we can’t rule out the possibility of a comeback.”
Mr. Pouncey suggested that increasingly uncertain sentiment in the legacy markets may drive up demand for bitcoin and similar assets that are seen as non-correlated with the mainstream financial markets among institutional investors.
“If there is a significant pullback in the equity markets, there will be an inflow of money into uncorrelated assets, or assets that lie outside the reach of the traditional financial system in which cryptocurrencies are a potential alternative. The inflow of institutional capital to the cryptocurrency market, due to the increase in regulation and investor protection, could lead cryptocurrencies to a positive quarter.”
Chicago Mercantile Exchange (CME) Reports Volume Growth in Futures Trading
CME has reported an increase in the trading volume of its bitcoin futures contracts of more than 50 percent since its December launch. During March, roughly 2,500 contracts (worth 5 BTC each) were traded, up substantially from December’s volume of 1,600.
Tim McCourt, the managing director and global head of equity products and alternative investments at CME Group, recently told reporters that trading volume “is steadily increasing each month.”
Mr. McCourt also stated that greater regulation of the markets is bringing more institutional investors into the fold, stating that “more regulation will increase efficiency of the market and give investors confidence.”
Lack of Regulation Perceived as Floodgate Holding Back Widespread Institutional Investment
Adrian Lai, co-founder of Hong Kong-based cryptocurrency investment firm Orichal Partners, has described a lack of clear and effective regulations surrounding the virtual currency markets as the primary obstacle to widespread institutional exposure to the cryptocurrency markets.
“Regulators are not banning the development of cryptocurrencies, but are trying to better regulate the market, which should help the industry mature,” Mr. Lai said. “If the regulatory stance gets clearer, large funds will be more assured and willing to commit significant capital.”
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