To many stakeholders, institutional investment is considered as the “holy grail” of the market, but is this a reality?
When Bitcoins, codebase and whitepaper were first announced when the first Bitcoin block was mined back in 2009, there wasn’t much of a fanfare. No one really cared and at the time only a few individuals had an interest in the project with many dubbing it a “useless failure” before it had even begun.
But after the 2016-2017 bull run, the attitude towards BTC and cryptocurrencies drastically changed, dragging them kicking and screaming into the limelight. Today Bitcoin is no longer a niche asset designed for techy-types, and its price has exploded. Its popularity has reached such an extreme that it has inspired the creation of literally hundreds of other crypto and virtual currencies.
A retail investors market
The increase of the value of Bitcoin from $1000 to $6000 in around 18 months was largely down to the actions of retail investors. These investors made a number of largely speculative investments and this was, and is what drives the industry forward.
Whilst there is nothing wrong with interest from people like you or I, at the end of the day, it is the institutions that hold the majority of the cards. From the incredible amounts of capital that they have access to or the connections that they have within the industry, institutional investors have the key to the core of the market.
When we consider this on the scale of the global economy, the crypto market is nothing more than a little peak, a needle in a haystack, or a grain of sand on a vast, sandy beach. Although the market has a collective value of around $250 billion, its success so far is largely attributed to small-time investors.
It remains that institutions such as hedge funds and banks hold the sought-after key to trillions of dollars in assets and they are fast becoming a big target for the crypto industry.
Volatility and lack of infrastructure
At the moment, the industry is extremely speculative and very volatile with most investors are in it to make a quick profit. This is not enticing to institutional investors as most are looking for long-term returns through securing their clients’ trust over time, rather than just making a quick buck and running.
It is also worth noting that traditional economic sense and theory cannot be applied to the cryptocurrency industry due to the variance and unpredictable nature of the market. There is also a problem with the lack of infrastructure that would support investors that have next to no cryptocurrency knowledge or experience.
A lot of work needs to be done to create an environment where institutional investors are not just enticed, but are encouraged and rewarded for taking the plunge into this previously unknown sphere. It is only then that the market can truly hope to reach its maturity.