Institutional investors enter the cryptocurrency market through over-the-counter platforms02.10.2018
Institutional investors are increasingly involved in the cryptocurrency market, the capitalization of which currently stands at $ 220 billion. If earlier especially large transactions with digital assets were carried out by private investors, now hedge funds and other institutional institutions are more and more often noticed in transactions worth $ 100,000 and more through private transactions. It is reported by Bloomberg, referring to the statement of the head of trading company Cumberland Bobby Cho (Bobby Cho). Cumberland is a cryptocurrency division of the Chicago-based company DRW Holdings LLC, which is engaged in over-the-counter trading.
“What is happening now is “professionalization“. The days of the “Wild West” will soon be over”, said Cho.
According to research by Digital Assets Research and TABB Group, in April, deals with cryptocurrencies on the OTC markets were made in the amount of $ 250 million to $ 30 billion daily. On publicly available cryptocurrency exchanges, trading volume for the last day amounted to $ 15 billion, according to CoinMarketCap.
"In our over-the-counter business, we are watching three-digit growth", said Jeremy Allaire, CEO of Boston-based Circle Internet Financial.
According to Digital Asset Research, trading volumes on the over-the-counter market fell along with cryptocurrency prices, but it did not suffer as much as the publicly available exchanges, where trading volumes fell by 80% relative to peak values. Cho also noted that many institutional investors began to enter the cryptocurrency market only recently, seeing a decrease in volatility.
“Volatility was the main drawback and cause for criticism among institutional investors, but in the last 4-6 months the market is in a very narrow range. It seems that due to the decrease in sharp price fluctuations, financial institutions are becoming more located at the entrance to the cryptocurrency space”, he said.
It is beneficial for large companies to use OTC markets, because they can agree on a price in advance and not worry about the sharp jumps in quotations, the likelihood of which increases due to their large transactions.
“If they liquidate an asset, they do it at UTS”, said the founder of the company Bcause, which deals with the miners of the institutional level cryptocurrency, Tom Flake.
The topic was also expressed by Sam Doctor, Managing Director of Fundstrat Global Advisers, noting that large buyers enter the OTC markets because the exchanges cannot provide sufficient liquidity.
“At the moment, more and more institutions are entering this market and the imbalance is increasing”, he said. “Therefore, more and more brokerage firms appear, they want to provide institutional buyers with the necessary liquidity.