According to Wills “this kind of collaborative approach is prompting appropriate regulatory efforts in several other jurisdictions, which in turn has opened some pathways to help more institutions enter crypto. Gradually, the U.S. environment is becoming clearer, too, despite the complexity of navigating a patchwork of
In addition to regulation, investors have simply had their hands tied due to logistical matters within the industry. The matter of custody—how to safely store large amounts of money, or in this case cryptocurrencies—has been problematic for the industry. Most large banks and financial services institutions have been unwilling or unable to help. This means that institutional investors have had to rely on until now, largely unproven third parties that are not always fully transparent or secure enough. However, as more companies strive to provide a reliable custody solutions for institutional funds, these very investors are gradually exhibiting greater willingness to expand their al
Liquidity has also been an issue for investment funds considering the highly fragmented market regularly experiences trade execution issues. Traditionally, institutional money provides a foundation for asset classes by generating liquidity and providing greater stability. However, crypto’s deregulated and disparate technology infrastructure means that liquidity is hard to come by and consequently generates v
Nonetheless, the market has been steadily working to provide solutions that dispense with the unstructured nature of the crypto market by shifting the focus towards delivering full-stack solutions. This ensures that institutional investors can access multiple exchanges in one location, reducing the liquidity problem while ensuring that cryptos are treated more similarly to traditional asse
Overall, this new push for legitimacy and greater stability is a key sign that the crypto market is maturing—a trend borne out in the reduced volatility of prices. While some of the reduced volatility is attributed of lower trade volume, Wills argues that much of it has to do with “the consequence of the tempering effect of this institutionalization of crypto from mechanisms such as futures
What does it Mean for The Market?
Institutional money will likely be a stabilizing force for cryptocurrencies. While this influx of cash and attention is unlikely to completely drive the volatility out of the market—a good thing considering it provides excellent opportunities for smart institutional funds—it will help temper the sector’s chaotic
As it moves past its infancy, cryptocurrency is seeking to be a legitimate force in the financial world, and new technologies and developments are helping push this narrative. As the asset class matures and investors continue to join, cryptocurrency’s evolutionary momentum will accelerate, helping the asset class achieve greater mainstream visibility and subsequent a
“The word has to get out that the custody, liquidity, and technology solutions are here and working and that the regulatory environment is increasingly clearer. There was a perception issue that crypto, as a nascent asset class, lacked solutions for professionals. But the institutions just need educating so that they know they can treat crypto pretty much like any other asset class. Crypto has been a market where many people made money while the institutions remained sidelined, but that story is part of the past. Now institutions increasingly see themselves participating more and more in crypto’s future,” Wills conclu