Daily Management Review

Institutionalization Of Cryptocurrency Being Inhibited By Three Factors: TABB Report


05/16/2018




Institutionalization Of Cryptocurrency Being Inhibited By Three Factors: TABB Report
There are three trading risks that are holding back cryptocurrencies from going institutional according to a report by the TABB Group called “Crypto Trading: Platforms Target Institutional Market”.
 
The report states that while some of the cryptocurrencies went mainstream in 2017, there are trends that the current year would see them getting institutionalized provided that the trading risks are mitigated in 2018.  The report by TABB is the first report in a series of such reports that would investigate the role and impact of institutional players in the virtual currency trading markets and the execution platforms that are looking out for their business.
 
According to the author of the report, TABB senior analyst, Monica Summerville, the head of European Research, institutional interest in crypto currencies is being driven by opportunities for exceptional revenue and alpha. About US$3 billion on a daily basis is being generated in revenues from trading fees by the top cryptocurrency exchanges, she highlighted in the report. She further notes that the over-the-counter (OTC) cryptocurrency market has higher spreads or commissions compared to the mature financial markets and additionally, investments in cryptocurrency is offers higher returns with lower correlation to other asset classes.
 
According to Summerville, traditional buy-side players are the main source of such interest – especially those in the hedge funds as well as those in the proprietary trading firms. Additionally, interest is also being shown by investors and traders in pension funds and sovereign wealth funds. Further, early bitcoin adopters, miners and private wealth is also included in that list. And consequently, a range of new solutions aimed at institutions are being offered as a response by the venue and vendor community.
 
According to the estimates in the TABB report, the value of the present institutional daily cryptocurrency traders who have the onus of executing large blocks OTC on a bi-lateral basis, is estimated at two to three times that of exchanges, while already the institutional trading activity apparently has exceeded the retail crypto trading market share taking place mostly in the OTC markets.
 
“The word on the street is that a significant amount of additional institutional money is being amassed, sitting on the sidelines,” says Summerville, “held back by a lack of greater regulatory clarity, institutional grade data and enterprise-ready infrastructure, waiting for the right conditions to enter the market, expected to begin happening this year.”
 
The seven crypto exchange/platforms aimed at institutions, discussions about emerging market structures and the required elements of a secured cryptocurrency market is included in the 17 page report. The series would next include an examination of the important blockchain technology developments that lend support to the centralized and decentralized exchange models and approaches the traditional institutions engaged in buy- and sell-side are undertaking for cryptocurrency investing and trading.
 
(Source:www.businesswire.com)






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