After months of speculation, institutional investors have finally stepped into the cryptocurrency market by becoming the biggest buyers through over-the-counter (OTC) transactions. According to a report by Bloomberg, these investors have bought over $100,000 cryptocurrencies via private sales.
Bobby Cho, global head of trading at Cumberland, a division of crypto company DRW Holdings LLC, said that the cryptocurrency market is now learning from its mistakes. Back when cryptocurrencies were breaking records, miners as well as sellers were holding on to their coins for making more profit. But when the market was suffering losses, these people were selling them at the recovery points. Now, these miners are selling cryptocurrencies in regular sales. “The Wild West days of crypto are really turning the corner,” explained Cho.
Crypto and financial research companies, Digital Assets Research and TABB Group, discovered that OTC transactions ranging from $250 million to $30 billion took place every day in April 2018. This figure is higher than the $15 billion traded in crypto exchanges per day.
Although, the OTC market has suffered losses due to dwindling crypto prices, its position is far better than crypto exchanges. Cho said that institutional investors were hesitating due to the volatile nature of the crypto market. “Over the last four to six months, the market has been trading in a very tight range, and that’s seems to be corresponding with traditional financial institutions becoming more comfortable diving into the space,” concluded Cho.
Tom Flake, founder of crypto mining solution provider Bcause LLC, added that institutional investors are only liquidating cryptocurrencies through OTC. Where large transactions can easily influence the crypto market, private sales allow investors to fix the prices before completing the purchase.
Sam Doctor, Quant Strategist at Fundstrat Global Advisers, said that OTC transactions are preferable because institutional investors tend to buy a large amount of cryptocurrency and exchanges fail to meet these requirements. He added that the market is currently imbalanced owing to the increasing interest from institutional investors. Brokerage firms are trying to bridge the gap by offering their services.
However, these companies are not the only ones rapidly launching products for institutional investors. In July 2018, Coinbase launched a custodial service “Coinbase Custody” for institutional investors. Later in August, Bloomberg reported that Goldman Sachs was also eyeing the possibility of opening the first custody for crypto funds and institutional investors.
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Last modified: May 20, 2020 5:18 PM UTC