Institutional Investors Already Gobbling Up Cryptos Via OTC Desks


That much-anticipated influx of institutional investors that the cryptocurrency community has been waiting for is already happening, albeit, behind closed doors, a Bloomberg report shows.

Institutional investors discretely solidifying their position in the crypto market

While the popular belief is that Wall Street and other financial institutions are waiting for the regulatory environment to clear before taking the plunge into crypto, the fact of the matter is, ‘big money’ is already quickly making its way into the $200 billion cryptocurrency market.

According to Bobby Cho, global head of trading at Chicago-based crypto and OTC trading giant Cumberland, institutions like hedge funds are quickly replacing high-net-worth individuals as the largest buyers of digital currencies.

The chaos surrounding every multi-billion dollar trade completed via exchange trades may have played a part in this unfolding scenario. Additionally, several exchanges have faced tumultuous times; declines in volume, regulatory and security concerns, and controversy over user funds are not new.

Perhaps that is why many of the crypto-crazed institutional investors look at OTC’s discrete nature as the best way to get into cryptocurrency.

Large buyers and sellers prefer to make private sales for one main reason – large transactions completed on exchanges have often resulted in price swings.

Private sales, on the other hand, do not pose this risk as parties have the freedom to set prices and execute trades without worrying about how the transaction would affect the global cryptocurrency market.

OTC the go-to platform for institutional buyers

The OTC market is said to facilitate, on average, between $12 billion and $30 billion worth of trade per day. These volumes are much higher than the approximately $12 billion traded daily on exchanges in recent times.

As expected, the over-the-counter market has declined in respect to trade volume as prices fell across the wider cryptocurrency market, but the declines are smaller than what has been witnessed in the exchange market.

In April, Digital Asset Research estimated that exchanges had lost up to 80 percent of their volume since crypto trading hit its peak in late 2017. Although that trend is reversing as exchanges begin to see more demand, the OTC market has emerged as the go-to platform for institutional buyers.

TABB research

In May, Research and Consultancy firm TABB released a report that detailed some of the factors hindering the entry of big money investors into cryptocurrency.

According to the report, some investors have been stockpiling capital in preparation for a grand entry into the digital market.

The report’s author Monica Summerville had at the time noted that:

“[Institutional participation is currently] held back by a lack of greater regulatory clarity, institutional grade data, and enterprise-ready infrastructure, waiting for the right conditions to enter the market, expected to begin happening this year.”

Corporate buyers are said to be closing deals worth over $100,000 in cryptocurrency on average, and many of these buyers prefer the fixed-price OTC market.

Much of the enthusiasm in the institutional space has come from an increase in the professionalization of the crypto market, with the “Wild West” madness seemingly beginning to wane.

The recent lull in the market has served as the spark for some firms to take bold strides into the crypto space.

Bobby Cho stated:

“Over the last four to six months, the market has been trading in a very tight range, and that seems to be corresponding with traditional financial institutions becoming more comfortable diving into space.”

While there is still much that needs to happen before Wall Street fully embraces crypto, signals from firms like Goldman Sachs and the many institutional-grade products being launched are a sure sign that institutional investors are taking sold steps towards entry into the digital asset market.

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