Who Are Institutional Crypto Investors and Do They Shape The Crypto Market?
The cryptocurrency industry first saw institutional interest back in 2018. That was when retail crypto traders cooled down about cryptocurrencies, being depressed by the market crash. At that time, companies and financial institutions started to realize the opportunities in this industry, assessing possible risks and weighing them against profits.
In 2021, after Bitcoin reached its all-time high, institutional crypto investment got a push, following the world’s tech and financial companies. In this article, we will explain who institutions in crypto are and what their decision to enter this market changes in the industry.
Who are Crypto Institutional Investors?
A crypto institutional investor is an organization or entity that invests significant capital in cryptocurrencies and blockchain-related assets. These investors are typically institutions rather than individual retail investors. Some common types of crypto institutional investors include hedge funds, family offices, trading firms, asset management companies, banks and financial institutions, and tech companies.
Here are the most prominent Bitcoin institutional investors:
- MicroStrategy (158,400 BTC)
- Tesla (10,725 BTC)
- Square (8,027 BTC)
- Grayscale Investments (643,572 BTC).
To start investing in crypto, investors usually register on institutional exchanges where they may get institutional services that differ from retail services. For example, institutions require high liquidity to conduct large transactions, market-making opportunities, custodian solutions, compliance with regulations, AML checks, etc.
The Impact of Institutions on the Crypto Industry Development
The institutional adoption of crypto impacts the crypto industry across various dimensions:
- Liquidity—Institutional investors typically trade in larger volumes, which contributes to increased liquidity in the crypto markets. Higher liquidity can reduce price volatility and improve market stability.
- Price discovery – As more institutional money enters the market, there is a potential for more efficient price discovery. Institutional investors often conduct thorough research and analysis, which can contribute to a more rational pricing of crypto assets.
- Enhanced regulatory clarity – The presence of institutional investors often stimulates regulators to provide more explicit guidelines and restrictions for the crypto industry. Regulatory clarity can reduce uncertainty, making it more attractive for institutional and retail investors to participate.
- Compliance with regulations – Institutional investors are subject to stringent compliance standards. As they enter the crypto space, there is likely to be an increased focus on regulatory compliance, which can lead to a more transparent and well-regulated industry.
Final Thought
Crypto institutional investors bring professionalism, liquidity, and regulatory oversight to the crypto industry. While this may introduce challenges, such as the need for regulatory compliance, it also opens up new opportunities for market growth, price discovery, and mainstream adoption of cryptocurrencies.
