In the last few weeks we’ve seen unmistakable signals about the strength of digital assets from three major areas of the financial world. In each case, institutional investors were at the heart, bringing the promise that big money may soon be hitting the crypto markets.
What is an institutional investor?
Institutional investors are organizations or people who trade securities on a large scale. In fact, these investors account for about 75% of trading volume on the New York Stock Exchange. In most cases, they are trading on behalf of other investors.
Because of their perceived expertise, institutional investors in the US, for example, are not subject to the same SEC regulations as retail investors. Additionally, due to their reputations and the large trading amounts, they also enjoy lower transaction fees than that of the individual investor.
Some of the types of institutional investors include:
- Pension funds
- Mutual funds
- Insurance companies
- Investment banks
- Private equity investors
- Hedge Funds
Signs that Institutional Investors are Bullish on Bitcoin
The Wall Street Journal has Softened its Stance on the Crypto Market
Since the crypto winter started in January of 2018, the WSJ has not been overly bullish on the cryptocurrency industry. In fact, their print version exchange pages do not list any cryptocurrencies whatsoever. But on April 30th, a few headlines in the WSJ Banking and Finance section caught this reader’s eye. Because for the first time in over a year, the WSJ seemed to be reporting on cryptos without the ‘bubble’ sunglasses.
The first headline read, “Digital Coin Stable Despite Concerns”. (Titles may be altered slightly from region to region.) They were talking about Tether and the tone of the article was one part disbelief and a little respect that Tether was holding ground. This was especially surprising since the recent allegations by the NY Attorney General (and a large part of the crypto community) claiming Tether’s reserves were compromised.
On the same day, an article right below that one read “Bitcoin Venture Backed by ICE Faces Delay”. The topic of that article is pretty self-explanatory. But if you pay attention to the two titles and have even the slightest knowledge of copywriting you would see, quite possibly, the makings of a trend.
Digital Coin Stable…
Bitcoin Venture Backed…
So we’re definitely seeing more positive coverage on cryptocurrencies by the Wall Street Journal. Especially when compared with some of their other headlines from just weeks before, for example:
- Bitcoin Is in the Dumps, Spreading Gloom Over Crypto World
- Crypto Fund Polychain’s Assets Drop 40% From $1 Billion Mark
- Bitfinex Used Tether Reserves to Mask Missing $850 Million, Probe Says
The above headlines are what we’ve been used to reading in the WSJ. Now, things seem to be changing.
Institutional investors often rely on the WSJ for their financial news and in watching for trends. This move towards a more lenient eye on the crypto market by the WSJ comes in tandem with two other instances of bullish tendencies by the institutional investing market. The first one coming from investment giant Fidelity.
Fidelity Survey Says Institutional Investors are Bullish
According to a recent survey by Fidelity, nearly half of their institutional investors think it’s worth it to invest in digital assets. In fact, 22% reported already owning some. This is just a few months after Fidelity announced a new crypto custody service for its customers. This survey helped them assess the overall interest level of their institutional clients in crypto assets.
Out of 441 respondents, 72% said they would prefer an investment product that held digital assets. Additionally, 57% of these institutional investors said they’d buy digital assets directly.
Fidelity has shown a history of bitcoin bullishness. The firm has been actively mining crypto since 2015 under the direction of CEO Abigail Johnson. But now it’s also evident that Fidelity’s biggest customers are extremely interested in crypto investments.
This attention on the crypto market by institutional investors did not go unnoticed by digital asset behemoth CoinBase, comprising our third bullish sign.
Coinbase Pivots to Serve Institutional Investors
In our last of our three signals that big investors are wanting crypto investment products, CoinTelegraph reported in April that CoinBase is making moves to put a heavier focus on their institutional customers.
While their platform for institutional investors, CoinBase Prime, has been operational for about a year, we are now seeing a concerted effort to move more energies into that area of business.
In the same article, CoinTelegraph stated that they had confirmed that CoinBase would be closing its Chicago offices. This signals CoinBase’s effort to scale down their high-frequency trade matching in favor of institutional client products. Currently, they provide custody service to the tune of $700 million in crypto assets.
“We want to be the first name any institution thinks of for crypto.”
Elliott Suthers, CoinBase Director of Communications
Where does that leave retail investors?
On one hand, those of us who are retail investors are happy that bitcoin and cryptocurrencies are getting their due respect. But many of us may also be a little bit leery. We’re worrying that big money is going to take over. Again.
What’s different this time is that the technology to create and exchange cryptocurrencies is openly available to anyone worldwide. And one thing that we can enjoy that institutional investors will never experience through their providers is that we own our bitcoin.
They, however, are holding a share in a centralized fund that does not provide the financial security and privacy that bitcoin does. Maybe that’s just what they want. And it’s possible that in this age of digital currency, we can all have what we want.
Also published on Medium.