Hedge Funds and Institutional Investors Now Bitten by the Crypto Bug
The timing appears to be just right for big fund players to move into the new digital territory of the $220 billion cryptocurrency market.
The crypto investor demography has undergone a sea-change from the high-riding days of 2016-17. In those initial years, Most of the people who bought Bitcoin wanted to be a part of the latest bit of technology hoping that it would translate into the new “gold” in terms of return on investment. Cutting forward to 2018, it appears that the decentralized technology currency market has matured sufficiently for the big players to now acquire digital coins to the tune of nearly $100,000. The underlining factor behind these transactions is that they are all conducted in private.
Financial Institutions are gluttons for Coins
The high net investment by institutional players was revealed recently by DRW Holdings LLC which operates from Chicago and is a key agency which handles many of the celebrity over-the-counter transactions.
The trading head of the institution Bobby Cho is one of the few industry leaders to make the revelation that Bitcoins are slowly but surely making their way into the padded wallets of financial institutions across the world.
And how are these investors finding coins to buy?
Look at the crypto miners with their acreages of mining-farms from faraway Scandinavia to the Mongolian climes. These big time “producers” of coins are no longer struggling to find buyers as they did years ago. They no longer hold market rallies either. Instead, they are highly channelized sales avenues with “scheduled” coin sales at regular intervals. There is more to the high-profile operations of the crypto miners because these commercial producers have also set up lucrative “liquidity desks” as well as normal mining operations.
However, there is further proof that the big players are foraying into the new realms of digitized currencies.
Researchers with Digital Assets Research and the TABB Group have identified OTC markets that notched nearly $250 million to $30 billion in April for day traders, even clocking $15 billion in a single-day by way of transactions.
Why do Financial Institutions want to own coins?
The question arises, why are the big hedge funds and institutional investors heading towards the crypto world? And the answer is in the fact that the “volatility” associated with these non-fiat currencies has now narrowed down considerably.
According to Cho, cryptocurrency trading in Asian markets involves nearly one-third of the DRW transactions. In addition, all of the large-scale sales happen in private, thus removing the risk of market floors spiking or dropping coin prices arbitrarily. Given the sterile transaction conditions of private sales, OTC liquidation is also well primed for these market genres.
However, the sudden demand for coins, which has arrived on the back of institutional buyers needs has meant third parties such as exchanges have found it a bountiful playing ground as they match these private buyers with inventory. In fact, an elitist “collector” approach is being applied to these coins as well. Many miners are not averse to offering premium “virgin” coins to these ‘covetous’ investors. Technically such freshly-minted coins are also desired because it’s guaranteed that such coins have not been used for money-laundering purposes.
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