Bitcoin Needs Hot Money to Reduce Volatility

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Bitcoin’s adoption by mainstream consumers has been severely limited by several factors including high volatility, lack of regulation, improper infrastructure, scattered interests, and others. But even with these, the Bitcoin ecosystem has been attracting research interests from industry-leading names such as Bank of New York Mellon, UBS, and IBM.

Well aware of the risks and challenges that Bitcoin poses, U.S.’s biggest prop trading firms and investors are also diving into the Bitcoin industry as they see huge potential for big profits in trading Bitcoin.  With “hot money” – the term generally used for investments from wealthy investors and firms – expected to steadily move into the digital currency, many are anticipating lower volatility and higher acceptance of the cryptocurrency.

Among the leading proprietary trading firms is, Digital Asset Holdings, a Bitcoin financial services firm launched last month under the aegis of the renowned DRW Holdings LLC. Cumberland Mining & Materials LLC, a DRW subsidiary, has “begun to experiment with cryptocurrency trading,” DRW said.

Jersey City, N.J.-based KCG Holdings Inc recently offered bids to buy shares of the Bitcoin Investment Trust. KCG spokeswoman Sophie Sohn said that, “the firm is actively exploring various opportunities related to Bitcoin.”

Another leading firm which decided to invest in Bitcoin is Wedbush Securities which saw the BIT as a “good place to get your feet wet with Bitcoin.”

With investors showing a keen interest in the technology behind Bitcoin, the market cap of the industry, which is currently a mere $3.5 billion, may swell massively in the coming years. Adoption may also accelerate if renowned industry players continue to invest in the digital currency industry. However, the industry must provide potential investors with increased liquidity, regulatory nod, and proper infrastructure, otherwise, it risks losing existing customers.

There is still a big chunk of consumers which do not trust Bitcoin as a payment method, but a stamp of approval from the biggest names might just change that.