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Demand for Crypto from Professional Investors

crypto demand

December 23, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Cryptocurrency adoption is a new form of investment. It has, however, been a reserve for individuals willing to take risks. 

Things are fast-changing. The demand for crypto from professional investors is becoming a reality. This follows uptake by high net individuals and other mainstream financial institutions. 

Here is what to understand about such developments;

The Reasons for the Demand for Crypto by Professional Investors 

A study by Fidelity has established the interest of Professional Investors in Cryptocurrencies. It found that 80% of institutions find digital assets as attractive investments. 30% of the institutions have already invested in crypto assets. Several more are likely to follow. 

Professional investors tend to operate on different regulatory frameworks than individual investors. They have had to contend with several roadblocks toward crypto adoption. They also run on varying operational requirements. 

The increased demand for crypto from professional investors would grow. This doesn't mask that it has taken over a decade to achieve this. Some of the reasons for the slow adoption are;

  • Lack of Easier Access 

Compared to retail investors, professional investors don't have similar access to crypto. Most of the crypt exchange services seek to meet retail investor needs. 

For example, most of them come with high spreads and leverages. These are offers that work well for those willing to take risks. Professional investors are not into risks due to the regulatory provisions. 

The regulations are opening up. This creates an increased demand for crypto from professional investors. 

  • Order routing and crypto-custody 

The decentralized nature of cryptos means they depend on market activities for price. Professional investors execute larger orders. Entry or exit from a crypto market would affect the value of the assets. For that, it requires order routing systems. 

The systems allow them investment access to various exchanges at the same time. They can then place spread the trades to avoid any major market movements. The regulations also need licensed crypto custody services. This ensures the safety of the investors. 

With these tools coming in place, the demand increases. 

  • Structured crypto-investment products 

The several hurdles to adopt cryptos by Professional investors have their options. They can either with a broker or hold assets in custody. Most professional investors want direct control over their assets. 

The best option is holding structured financial products. These assets already meet regulatory frameworks. They come in the form of single crypto assets and crypto indices. 

Top crypto index provider Bitwise crossed $100M in AUM as a result. The demand for crypto from professional investors helped the platform gain such values. 

Cryptocurrencies Gaining Professional Investors Attention

The surge in the crypto world has come with an increasing number of digital assets. Several projects are coming up to solve various world problems. The crypto market currently has thousands of cryptocurrencies. 

Not all these can gain professional investors' attention. Investors are looking for an assured return on investments. This comes only with coins that have been in the market for a long time. Already, there are market analysis and other tools to observe their market behavior. Investors understand the best trading strategies. 

The crypto assets gaining market traction are;

  • Bitcoin (BTC) 

Bitcoin is everything right with digital currencies. Since the release by Satoshi Nakamoto a decade, the coin has been the leader. 2020 has especially been great for the asset. It has rallied from the lows of $3k, now headed to $20k. 
Studies show the coin will surpass $20k and even hit $40k. It thus remains the undisputed attraction. 

  • Ethereum (ETH) 

No coin seems to give Bitcoin a run in the market than Ethereum. The coin has revolutionized how crypto facilities operate. It provides a support system for the other developers. Anyone can use its platform to create their own blockchain systems. They also support several other decentralized applications and finances

The several use cases for digital currency makes it valuable. Most professional investors have it as the best alternative to Bitcoin. 

  • Ripple (XRP) 

Ripple has become a favorite cryptocurrency due to its role in cross-border transactions. Many leading financial institutions are using the services. Its use cases mean the demand for crypto and price keeps growing. The professional investors are looking to gain from such a surge. 

The Future of Professional Investors in Crypto 

Crypto growth is not slowing any time soon. More professional investors will be taking up digital assets like never before. The US Securities and Exchange Commission notes the number of professional investors in cryptos increases. They note the increased demand for crypto by investors. That they are looking to expand their portfolios. 

Several countries are also becoming crypto-friendly by the day—top of the countries is India. The country has increased crypto adoption since the Supreme Court lifted the crypto bans. Many startups have since come up in the crypto world. They include both foreign and homegrown crypto-based firms. 

The crypto growth comes amid the Coronavirus pandemic effects. The pandemic has not been any friendly to the traditional currency. Most of the economies have been going down as currencies lose value. This is different from the growing cryptocurrency markets. The growth has since cemented Bitcoin's state as a safe haven. Lesser experts are questioning its role as the "digital gold."

The growth of the professional investor's crypto is also evident in career growth prospects. The professional site LinkedIn reported Blockchain as an in-demand hard skill for 2020. It mirrors reports by other top job sites like indeed.com and Glassdoor. 

Several career opportunities are coming up in the crypto. They include certified cryptocurrency trader (CCT) and Certified Cryptocurrency Expert (CCE). The experts are helping the professional and institutional investors take up virtual currencies. 

Bottom Line

The crypto uptake has been on the rise throughout the year. This follows the crypto offering the best alternative to the failing national currencies.

Top of those taking up the digital currencies are professional and institutional investors. They are investing in digital assets to gain from the rising gains. The investors are also gaining from increased regulations and access. Regulators are making the crypto market more investor-friendly.

The trend will keep on in the future as cryptos become more mainstream. 

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