When Will institutional investors enter the crypto market? Many expect the growth of the cryptocurrency market. Crypto enthusiasts await the entrance of large investors. That would restore the cryptocurrency market and pushed it to new heights.
Whales, who are they?
Whales in the crypto are people with a lot of cryptocurrencies. The amounts they enter the market start at several million dollars. In the financial terminology of the “old school,” these people are known as “High Net Worth Individuals” (HNWI).
These HNWI whales, every time trading in the market create huge waves.
But who are these whales? They consist of
EARLY INVESTORS, VENTURE CAPITALISTS, CRYPTOCURRENCY HEDGE FUNDS, INVESTMENT BANKERS and RETAIL INVESTORS
who early started trading or invested millions of dollars.
What is most notable here, is that most of the market is still mostly retail investors. In the old school financial markets “mum-and-dad investors” and refers to unprofessional investors.
If we undertake to evaluate investment groups regarding who currently owns a more significant market share in the crypto space, then it might look something like this:
- Early investors, crypto enthusiasts
- Crypto venture capitalists and hedge funds
- Retail investors, the so-called “mom and dad” and the average age of which according to some sources are 26 years old.
- Investment banks and Wall Street
Institutional Investors consider the possibility of entering the crypto
But until now, indeed the most abundant whales remain aloof from cryptology. Who are they? So these are pension funds, insurance companies, endowment and mutual funds. They maybe want to enter the crypto market, but at the moment they can not. There are several reasons for this.
These institutional investors are real whales, because if you look at the amounts they have at their disposal, the cryptocurrency market may seem tiny.
FOR EXAMPLE, ONLY US PENSION FUNDS CONTROL ABOUT $ 6 TRILLION
Cryptocurrency capitalization has not yet reached a trillion dollars.
And now we will consider why they observe in aside.
In 2017 in New York in November last year, the Consensus Invest conference was held. At which the heads of investment institutions agreed that the minimum cryptocurrency capitalization should be 1 trillion dollars, and only in this case their entrance to the crypto would become “feasible.”
All that is below 1 trillion would be too small for these considerable whales to dive in there. At the conference, it was also apparent that investors show great interest and desire to enter the cryptosphere.
Recently, OMERS, the Ontario pension fund, has set up a public company focused on the Ethereum, which plans to raise $ 50 million to invest in the Ethereum, as well as to the ERC20 tokens.
Why are not they with us?
Are we talking about a bubble? Yes, maybe it is. But all likely begins.
At the time of writing, the total market capitalization of the cryptocurrency market is about $ 400 billion. It may seem like a lot, but when you take into account the size of other financial markets, it’s like comparing a mouse with an elephant.
Comparison of markets in dollars:
Cryptocurrency – 400 billion
Dot Com bubble at the peak – 3 trillion
Gold – 7.7 trillion
Global stock markets – 73 trillion
Global real estate – 217 trillion
Derivatives market – 544 trillion
Okay, you realized that these whales have a lot of money, but they can not jump into the pond, although some of them may desperately want it.
And so we came to the main reasons why they are not in a hurry to
enter the cryptocurrency market.
- Lack of laws and regulations. There were many comparisons of the cryptocurrency market with the Wild West. If you invest other people’s money, you can not just take them and “invest” it all on a bet in the casino.
- Security and storage of assets. These people do not know how the blockage works, not to mention how safe it is to store secret keys. Even if they do it, which is not difficult at all in their case,
THESE METHODS WOULD NOT COMPLY WITH THE RULES AND PROVISIONS OF THE SEC IN TERMS OF SAFE STORAGE
3. The market is too small, and these whales can not smoothly slide into this pool without causing huge waves.
About the first two points, then on these fronts, it is likely that progress will be made, possibly by the second half of 2018. There remains the third point.
“Because institutions are the largest force behind supply and demand in securities markets, they perform the majority of trades on major exchanges and greatly influence the prices of securities” – says the Investopedia.
At the moment, hundreds of millions of dollars can cause big waves in price. Imagine what happens if hundreds of billions of dollars pour into the market at once, while the entire market capitalization is only 400 billion?
The market will be crazy. That can push prices at not real heights in a short time. Do not go far and just
REMEMBER HOW THE MARKET AFFECTED after BITCOIN FUTURES
But as they say, the higher you jump, the more painfully it will fall. And we can guess that large investors avoid such shocks.
A temporary solution may be the so-called dark pools. These are private electronic networks that allow institutions to trade with each other outside the exchanges directly. And they have many serious shortcomings.
But anyway, we understand that sooner or later they will find the opportunity to do it. Will we take advantage of this?