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Why Institutional Traders Are Considering Cryptocurrency

Bitcoin started as a hobby for techies and cryptographers. Yet in little more than a decade, it has become a true global currency.

Watching Bitcoin grow from fractions of a penny to $20,000-per-coin certainly drew the attention of Wall Street. Until recently, however, institutional traders lacked the necessary market infrastructure to get involved in significant numbers.

Today, thanks to better exchange services and new financial instruments targeted at the institutional market, pent-up demand for cryptocurrency is about to be unleashed, something that should pique the interest of every trader, large and small.

Why Institutional Traders are Being Drawn to Crypto

During the exponential growth seen in crypto’s 2017 to 2018 bull market, hedge funds and other traditional financial asset traders were frustrated by the lack of options available for gaining access to the market. Today, however, that infrastructure has been built out and refined and is capable of accommodating large-scale participation from these traders.

Bitcoin and Ether futures both went live in 2018, allowing Wall Street an additional avenue of exposure into crypto markets. Proposals for the first Bitcoin ETF (exchange traded fund) are also pending, with some observers calling eventual approval a “certainty.”

Global markets have also followed suit, introducing a variety of new financial instruments for the purchase and sale of crypto assets. Additionally, while the institutional OTC crypto market remains strong, new custody and trading solutions have been announced that specifically cater to the institutional market.

Market infrastructure developments aren’t the only reason why institutional money is coming. Many of the largest cryptocurrency projects continue to develop their networks at a rapid pace. Though enterprise adoption of crypto and blockchain has grown exponentially in recent years, we still remain in the earliest stages of this phenomenon.

As development continues and these networks become faster and more scalable, the true potential of broad enterprise adoption will begin to be realized, something that will likely have a profound impact on the trading market.

Another key hurdle to institutional trading is also softening at a rapid clip: poor understanding of blockchain and cryptocurrency technology. Many corporate leaders in the C-suite have admittedly been slow to grasp the potential of the technology, or wary about its implementation. That’s changing, however.

According to a study by the Global Blockchain Business Council (GBBC), 63% of institutional traders report that senior business leaders display a lack of understanding of blockchain and cryptocurrency. As these executives become better educated, adoption will likely become accelerated.

The GBBC study also showed that 40% of institutional traders believe blockchain is “the most innovative technology since the Internet” and that institutional traders believe cryptocurrency assets will be worth 10% of global GDP by 2027, a massive spike from today’s numbers.

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