Unlike the stock market, which is seeing itsÂ eight-year bull runÂ thanks, in part, to institutional investors, crypto-markets are dominated by individual investors. This is evident by almost every metric.
Crypto-exchanges, which are havens for individual investors, are overwhelmed. Popular crypto-exchange,Â BinanceÂ recently revealed that they added 250,000 new users in a single day. Kraken is onboarding 50,000 new accounts daily and they are logging an astonishing 10,000 new support tickets every day. In aÂ blog post, Kraken developers wrote:
â€śThe recent unexpected explosion in demand has been overwhelming.â€ť
Some exchanges including Binance, Bitfinex and CEX.io have temporarily halted new account registrations so that they can update their technology and better prepare their platforms for the rush of individual investors flooding the market.
Moreover, the much-anticipated Bitcoin futures contracts are also being dominated by individual investors. According toÂ The Wall Street Journal:
â€śIn a sign of how more conservative firms are keeping their distance, the CFTC data show near-zero trading in Cboeâ€™s Bitcoin futures by banks and asset managers.â€ť
Institutional money is on its way
There is endless speculation about a crypto-bubble. Whenever prices begin to shift, or the famously volatile crypto-market fluctuates, pundits are quick to declare the bubble burst and the movement over. When cryptocurrencies endured a flash crash before Christmas, commentators flooded the internet with their crypto post-mortems. Of course, most prices recovered within a single day.
In reality, the crypto-party isnâ€™t winding down. Itâ€™s just getting started.
Institutional money is on its way, and when that happens, digital currency values will receive a significant boost. Even JP Morgan Chase CEO and infamous crypto-skeptic, Jamie Dimon,Â recently expressed regretÂ for describing Bitcoin as a fraud. In an interview with Fox Business, Dimon acknowledged that â€śthe Blockchain is real.â€ť He went on to express support for cryptocurrencies that represent traditional currencies like dollars and yen.
Dimonâ€™s comments were made asÂ CNBCÂ reported that altcoin Ripple has more than 100 clients from the mainstream banking industry using its XRP token. On January 11th,Â MoneyGram signed onÂ to test Rippleâ€™s XRP token as a digital method for sending money. Rippleâ€™s price rose 25% after the news before receding later that day.
The burgeoning opportunities for institutional investment
As Blockchain use-cases become more prevalent, expect increased institutional investment in cryptocurrency markets.
In October,Â The Wall Street JournalÂ reported that investment juggernaut Goldman Sachs is considering offering a Bitcoin-related investment product. In comments to the Journal, a Goldman spokesman said:
â€śIn response to client interest in digital currencies, we are exploring how best to serve them in this space.â€ť
Ultimately, individual interest spurs institutional interest, and that will have a significant impact on the value of digital currencies.
Bitcoin futures contracts on Chicago based exchanges run by CME Group and Cboe Group represent burgeoning opportunities for institutional investment. Specifically, they indicate that much anticipated crypto-ETF funds may soon be available for investors. Moreover, according to estimates byÂ Morgan Stanley, in 2017 hedge funds invested more than $2 billion in crypto-related assets. This is a lot of money, but itâ€™s a small percentage of the possible investment.
In short, Bitcoin hedge funds areÂ counting their profitsÂ in thousands of percent and institutional investors canâ€™t stay away forever.
As digital currencies continue to gain exposure, they are proving remarkably resilient to investorsâ€™ worst fears. Technology is rapidly improving, and many of the same features and safeguards currently maintaining traditional investment markets are increasingly present in crypto-markets as well.
Although the total crypto market cap is tremendous, itâ€™s far from its full potential. Cryptocurrencies are just now becoming household names, and they are still shedding some of our preconceptions that stigmatized investment. However, the real growth driver will be institutional investments, which will be spurred on by the individual investors who want to participate in crypto markets through institutional platforms and by the market forces that make the possibility of considerable profits too essential to pass up.