Institutional Investors Will Drive the Next Bull Run

What needs to happen before the major players join the crypto world?

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The crypto market experienced a major bull-run last year, and we all know what followed in 2018. Currently, we’re in the middle of a big bear market. However, we believe that things will change.

In the short run, the market can still go up or down for a few ten percentage points. The fact is nobody really knows what will happen. But we believe that in the long run, i.e., over the course of the next few years, we can expect many positive developments and a lot of fresh money flowing to the market.

There’s one factor that will play an important role in this development. The first major crypto bull market was powered by individuals, but the next major crypto bull market will be powered by big institutions.

Institutions will be the main crypto market driver in the future.

There are many reasons why we so strongly believe that. But let’s first see which three prerequisites need to be met before this happens and how we’re doing on that front.

1. Regulation

We won’t go into details on this, because we can all follow recent developments in all parts of the world, and hopefully we all understand why this is an important factor.

2. Professional Custodial Services

Here’s a fact: institutional investors want to have professional and safe custody of assets, preferably they should also be insured. A lot is already happening in this arena as many major market players are announcing their developments.

For instance, in 2017, ICONOMI announced the launch of their custodial services in 2018. Ledger, the hardware wallets market leader partnered with a large Japanese bank Nomura to offer professional digital asset custody solutions for the market participants. Last but not least, Coinbase also introduced their own suite of institutional products.

3. Exchanges

It’s worth noting that know that currently, the market leaders among the crypto exchanges are companies like Binance, Huobi, and others. But their start-up status means that the majority of traditional investors won’t entrust their money to them.

Rather, they want to see the big, well-established players enter the market and offer established exchanges, managers, and custodial services. When such players appear, a lot of money will start flowing in. And the good news is — more and more traditional players are deciding to enter the crypto market.

In April, Thomson Reuters did a survey and found out that one in five traditional financial institutions consider cryptocurrency trading later this year, over the next 3–6 months. Nasdaq, one of the biggest exchanges in the world, is open to becoming a cryptocurrency exchange.

“I believe that digital currencies will continue to persist it’s just a matter of how long it will take for that space to mature.” — Adena Friedman, Nasdaq CEO

Goldman Sachs, which initially wasn’t very fond of the crypto market, also recently announced a launch of a Bitcoin trading operation. Their clients reportedly flooded them with requests for buying and storing Bitcoin, as Bitcoin is often compared to the physical gold in terms of storing value.

“It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value.’” — Rana Yared, Managing Director, Goldman Sachs

ICE, the parent company of the New York Stock Exchange (NYSE) has been working on an online trading platform that would allow large investors to buy and hold Bitcoin.

Fidelity Investments is also becoming a big supporter of crypto and is staffing up on cryptocurrency projects.

“I love this stuff — bitcoin, ethereum, blockchain technology — and what the future holds.” — Abigail Johnson, CEO of Fidelity Investments

They started mining Bitcoin in 2014 and added Ethereum in 2015. Fidelity manages 2.5 trillion USD of assets for over 27 million investors!

Fidelity Investments assets under management and investors

So, one of the largest asset managers in the world is really positive about cryptocurrencies, is developing an exchange, and setting up its own custodial solutions. That’s great news!

How big (or small) is the crypto market?

As we pointed out earlier, yes, the market may move down for another 30, 40, or even 50% in the short run. But we believe this is nothing compared to the developments we can expect in the next few years.

The total cryptocurrency market capitalization at the moment is less than 0.3 trillion USD. Compared to Apple with 0.9 trillion USD, all cryptocurrencies are currently worth merely one-third of that single company.

The size of crypto market (2018), compared to other markets
Visual Capitalist, own calculations

Bitcoin is often compared to gold. Bitcoin’s current market cap is around 100 billion USD, whereas the total for gold (as mined up to now) amounts to 7.7 trillion USD. Furthermore, comparing the crypto to the total global stock markets worth 73 trillion USD, we can truly see that crypto is really just at its early days.

To take these comparisons further, the global money supplies are 90.4 trillion USDthe global debt is 215 trillion USDthe global real estate market amounts to 217 trillion USD, and lastly, the mother of all, the derivatives with 544 trillion USD (that being the low-end estimate)!

 

To sum up: the crypto market is still incredibly small compared to other established markets and that there’s a lot of room for growth. We are excited to see what the following years will bring.


Watch Gregor explain this topic on video:

 

 

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DISCLAIMER: This article is for informational and discussion purposes only and does not constitute a marketing message, an investment survey, an investment recommendation, or investment advice. The article was prepared exclusively for a better understanding of market dynamics.

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