In an extensive blog post about potential major trends in the cryptocurrency space in 2020, Coinbase CEO Brian Armstrong said that hundreds of institutional investors are already investing in the crypto market.
Throughout 2019, with the launch of Bakkt, much of the year’s narrative surrounded the entrance of institutions into the crypto sector.
According to the CEO of one of the biggest cryptocurrency exchanges globally, institutions are already actively investing in the emerging asset class and the trend is likely to continue throughout 2020.
Will institutions further bolster the crypto market in 2020?
Prior to 2019, institutional investors only really had Bitcoin Investment Trust (GBTC) by Grayscale and CME Group’s futures market to invest in bitcoin.
There were not many options available to high net worth individuals, funds, and investment firms to invest in the crypto market securely with insurance and custodians.
Starting mid-2019, a growing number of exchanges and regulated service providers have started to provide custodial solutions targeting institutions. It led to the establishment of a more efficient and stable environment for institutions to invest in cryptocurrency.
“We’ve already started to see small institutions enter the cryptocurrency space. Hundreds have joined Coinbase Custody in the past 18 months. I would expect this rapid growth to continue in 2020, with larger and larger institutions coming on board. Eventually just about every financial institution will have some sort of cryptocurrency operation, and most funds will keep a portion of their assets in cryptocurrencies, partially due to the uncorrelated returns.”
Both Bakkt and cryptocurrency exchanges offering custodial solutions are yet to see large volumes, mostly because it takes time for institutional infrastructure to become more established.
“Bakkt will be likely first a trickle and then a flood. The reality is that most regulated futures contracts get low adoption on day1 simply b/c not all futures brokers are ready to clear it, many ppl want to wait and see, the tickers are not even populated on risk systems, etc,” Three Arrows Capital CEO Su Zhu said.
Independent funds seeing more institutional inflow
Despite a noticeable decrease in deal value in the latter half of 2019, in October of last year, Anthony Pompliano of Morgan Creek Digital said that the firm’s crypto fund secured $60 million from institutional investors.
Independent crypto funds, on top of exchange custodial platforms and futures markets, seeing an inflow of capital from institutions could be another catalyst that adds to an increase in institutional adoption in the upcoming 12 months.
Author: Joseph Young