A Big Wave of Institution Money is flowing into Crypto

institutional investors crypto

Market Outlook of Cryptocurrency in 2019

Here is my 2 cents worth of opinion in the crypto market. My bank had less than $1,000 in 2016 and it was the year i got vested into Ethereum ($70) and Bitcoin. Just like anyone else who first read the Bitcoin White paper written by Satoshi Nakomoto, I got sucked into the rabbit hole trying to read and understand what this whole technology is about. The more I research, the more I find its idea fascinating, exciting and revolutionary. I still do right now.

Then in 2017, a new term called Initial Coin Offering (ICO) came up. In the traditional finance world, to launch an IPO you have to prepare a company prospectus, find an underwriter, prepare legal documents, meet up with banks and do a whole lot of other stuff. However, in ICO, all you need is to have a grand vision, a whitepaper, road map and millions are raised within minutes. Regulators are still unaware at this stage and Big institutions did not bother yet.

2017 is a year of frenzy ICOs, hype, dreams, potential of blockchain etc. Big ideas sprung up and Ether flow its way into these projects. Some were great but majority were crappy or scams. It was a big bubble comparable to the dot-com era when internet was first discovered. The whole market slowly gained traction and out of a sudden, the mass public (Japanese and Koreans) rushed in driving this strong surge of momentum upwards pushing the entire market cap from $100 billion to $800 billion within months. This phenomenon is known as “The Greater Fool Theory”. An asset without value is sold to a greater fool continuously. At this point, my highest paper profit recorded was $13,000 (starting from just $1,000) and here’s my biggest lesson learnt: Greed.

2018 is the year of crypto winter. China ban cryptocurrencies, Korean exchange crackdowns, companies fall short of investors’ expectations, exchanges are being hacked, countries after countries declare their stance on crypto and regulations came in hard. There was fear, panic selling and a lot of “cleansing”. Many crypto companies with no commercial substance are out of the game and exchanges delisted a lot of tokens that are not legitimate. Weak hands panic sold and scams are being clamped down. Regulators are trying to set clear regulatory frameworks and it is still doing so now. 

2018 is also the year when a lot of companies pivoted, face road blocks, adjust their road map, change their plans, tone down expectations etc. NEO wanted to be a Smart Economy but now is moving away from the financial industry towards the gaming industry. The reasons is because the financial landscape is too regulated and they are going for the low-hanging fruit that works. OMG discontinued their plan on Honte to focus on plasma, TenX’s card issuer, WaveCrest, was suspended by Visa. SEC issues report on DAO classifying them as security tokens. 

2018 is ALSO the year of technical progress. It was a test of technical feasibility, refinements, talent hiring and auditing of smart contracts’ security to be deployed commercially. Institutions and governments are coming in together to explore proof-of-concepts. IBM and Maersk has run trials on shipping solutions, Walmart is using blockchain to track food supply, Intel wins patent for energy-efficient bitcoin mining, South Korea is developing blockchain-based voting system, Temasek’s Venture arm Vertex invests in Binance, Alibaba tops blockchain patents, Samsung, LINE, Tencent, Facebook, and the list goes on. These giant public companies are onto something and disruption is on its way. There is going to be winners and losers inevitably, just like how automobiles took over horses as our mode of transport. Change is resisted, skeptics and doubts argued its necessity, new regulations are enacted but in the long-run, change is constant and change is inevitable. 

To sum up, I would say 2016 is a year of discovery, 2017 is a year of hype, dreams and 2018 is a year of technical progress, practicality. 2019 is going to see adoption, use-cases on a small scale and 2020 is going to see wider adoption. As compared to 2017, do you think institutions are still unbothered? Definitely not, middle-man such as financial institutions have the highest risks of being disrupted. Sending $ cross-borders are now possible WITHOUT middleman. $300 million worth of BTC was sent with only a transaction fee of 4 cents. How long would it take and how much would transaction fees would it cost if one were to do a wire transfer through Paypal instead?

Let’s see whats coming up in 2019:

  • Intercontinental Exchange (ICE), the parent of New York Stock Exchange (NYSE), is launching a Bakkt Bitcoin (USD) Daily Futures Contract scheduled to trade live on Jan 24 2019. The adjusted time frame allows additional time for onboarding customers. These customers are not people like you and me, these are the high-net worth individuals, family offices, big boys and big institutions. 
  • World’s second largest stock exchange, NASDAQ is partnering up with Investment Management firm, VanEck to launch Bitcoin Futures and a variety of BTC Derivatives in Q1 2019. NASDAQ and VanEck has been working very closely with Commodity Futures Trading Commission (CFTC) to lay out clear transparent framework calling it the “regulated crypto 2.0 futures-type contract.”
  • Fidelity Investments, the 4th largest asset management company in the world handling $7 trillion in client assets has announced its new service of cryptocurrency custody and trade execution for institutions, hedge fund firms and family offices but not to retail investors
  • VanEck and SolidX is proposing  the first bitcoin exchange-traded fund (ETF) which is still pending under the U.S. Securities and Exchange Commission (SEC). The deadline of the review period for its ETF is on 27 Feb 2019. 
  • Wallstreet Darling Goldman Sachs and Galaxy Digital recently invested in U.S crypto custody service BitGo in its series B funding. Goldman Sachs is reportedly bringing selected clients onboard to test out its bitcoin trading product and custody offerings for crypto fund. There is no official news from Goldman yet, but why would they invest in a custodian service? They are preparing for something in the future. 
  • Morgan Creek Capital launched an Index Fund catered to institutional clients

We can clearly see there is pent-up demand and the institutions are coming in. But the biggest problem is they are late in the game… Bitcoin was at its all-time high of $20,000 and there is no way these large hedge funds, investment firms are buying at the top. Institutions buy in large amounts and so they have to make the price go down.

How do they do it? Through media channels, spreading fear, uncertainty, doubt (FUD). This seems like a far-fetched big conspiracy theory but let the facts in the video decide for yourself. Teeka Tirwari used to be ex-Wall Street and he is the youngest in history to be made VP of Lehman Brothers.

I used to think BTC can hold the $6,000 support line but it broke. Now it’s at $3,000 another support zone. Would it break again I’m not sure. But there’s one thing for sure is BTC is near its bottom. Is it at the lowest of the bottom, nobody knows. But you can imagine to launch all these financial products, derivatives, ETF, these institutions need to BUY BTC before getting started and they have to buy it low. And when these institutions started selling, trading their products live, institutional investors, accredited investors are going to come in. Similar to opening the flood gates, when big capital flows into crypto, the entire crypto market cap would definitely increase tremendously. The only question is when?

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