02 Oct Institutional investors backing into bitcoin
The OTC market is providing an opportunity for institutional investors to test the market for cryptocurrency investments.
Analysis from Digital Assets Research and TABB Group shows the over-the-counter (OTC) market handled from $250 million to $30 billion in trades per day in April 2018. Cryptocurrency exchanges handled another $15 billion in daily trading during the same period.
What are institutional investors looking for?
According to a new Bloomberg report, institutional investors have replaced high net-worth individuals as bigger buyers of bitcoin over $100,000.
Jeremy Allaire, CEO of Boston-based Circle Internet Financial, said institutional investors have shown triple-digit growth in 2018.
Purchases over-the-counter appeal to institutional investors who are generally looking for private buying and selling of larger block transactions that have less influence on the price of the digital asset.
Tom Flake, the founder of Bcause, said his customers are institutional miners with hundreds to thousands of machines, looking for a stable way to handle larger transactions via OTC or through brokers.
“At this point in time, because more and more institutions are beginning to enter the market, there’s more of an imbalance [of supply],” said Sam Doctor, managing director and head of data science research at Fundstrat Global Advisers. Brokers are able to help institutional investors find inventory.
Some institutional investors will pay a 20% premium for “virgin coins” that can be shown to not be part of money laundering schemes according to Travis Kling, founder of hedge fund Ikigai.
Tailored institutional services on the horizon
In addition to the desire for larger transactions, several cryptocurrency exchanges such as Circle and Coinbase as well as brokerages are now actively pushing their services to institutional investors.
Part of their offers include dedicated platforms with margin finance, high-touch execution including OTC block trading, and execution algorithms. Other services include segregated cold wallets, custodial services, designated account service teams and guaranteed response times to ensure timely trading for these high-value investors.
The remaining barrier to institutional investors is cryptocurrency market volatility – a reality but moving in a less volatile fashion in recent months.