Well, in the last few months, there were several stories of an increase in institutional penetration in the crypto market. Last month in early October, a Bloomberg report cited Bobby Cho, global head of trading at Cumberland, affirming to this. Cho told Bloomberg that bigger hedge funds are now replacing high-net individuals in the crypto market.
Much recently, Morgan Stanley’s research arm presented a report of its observation for growing institutional participation. Bitcoin bull Mike Novogratz has stated several times that there can be a huge inrush of institutional money flowing into the crypto market by mid-2019.
Also, there is a common notion developing that unclear regulations are stopping institutional players from entering the crypto space. While this narrative is gathering heat within a large number of investors, Bloomberg has another story to present.
Regulators Not a Major Hurdle to Institutional Entry
In its latest article, Bloomberg says, “The biggest roadblock to Wall Street behemoths rolling out cryptocurrency businesses could come from their own clients, rather than from regulators.” In their latest report, Bloomberg cites the observations made by fintech entrepreneur and Revolut Ltd. founder – Nikolay Storonsky.
Revolut, currently valued at over $1 billion allows retail investors to speculate on cryptocurrencies like Bitcoin and Ether. While speaking at the Web Summit 2018 in Lisbon, Storonsky said that Wall Street institutional giants have little interest in cryptocurrencies. This could possibly make things difficult for big financial institutions like ICE and Fidelity who are targetting institutional players by derivative products tied to digital assets.
“Unless these big institutional investors and hedge funds move heavily into the crypto world I just don’t think banks will move because they simply try to make money from their clients,’’ said Storonsky. “There is no interest from big institutional investors so far.’’
If Storonsky’s claims are true, it can crash down huge hopes of thousands of retail investors. After this year’s severe meltdown, the crypto market is now eagerly waiting for institutional entry. However, Storonsky’s views are quite similar to BlackRock CEO Larry Fink. Earlier this year, Fink said that his company’s clients have “zero interest” in cryptocurrencies.
Moreover, just last week in a CNBC interview, Fink said that his company won’t launch an ETF product until the market is “legitimate”. However, he noted that BlackRock has not closed the doors to crypto investments and associated products.
Big Institutions Preparing for Next Crypto Run
A number of traditional financial institutions, which were earlier hostile to cryptocurrency, are now warming up to them. Morgan Stanley is reportedly working on swaps for the Bitcoin Futures. However, it will start trading them only after having a proven institutional demand. Other banking giants like Citi Group and Goldman Sachs are also working on Bitcoin products.
However, Storonsky says that this year has been so far quite bad for the crypto market. Revolut’s Bitcoin trading volumes are as low as just 20 percent to what they were during December 2017. For the fortunes of the crypto market to turn over, 2019 will likely have to show some huge improvements. However, he still feels that Wall Steet won’t be the prime beneficiary of it.
“Fintech will be very big in crypto for the foreseeable future,’’ he said. ‘’I just don’t think banks will catch up.’’