There has long been a belief amongst cryptocurrency investors that the entrance of institutional capital into the nascent crypto markets would be the event that triggers the next bull market, as institutions have access to investment capital that far exceeds that of a cumulative group of individual investors.
A recent report from Binance Research – the market analysis arm of the world’s most popular cryptocurrency exchange, Binance – explained that an estimated 7% of all cryptocurrencies are already owned by institutional investors, signaling that the crypto markets have a long way to go before they are flush with institutional capital.
Crypto Markets Still Dominated by Retail Investors
One important piece of information found within the comprehensive report is regarding just how involved institutional investors already are in the crypto markets.
The report explains that the large amount of retail investors currently dominating the markets may be one factor that is leading to high levels of correlation between various digital assets, as institutions may account for as little as 7% of the entire markets when taking into account both Bitcoin and various altcoins.
“From data collected by cryptofundresearch.com, around 700 crypto funds operate…today, representing a total of just under $10 billion in assets… With a conservative assumption that they all hold solely Bitcoin, this would account for an upper bound of only 14% of the total market value of Bitcoin; If Altcoins are included in the assumption of their holdings… the ‘institutional proportion’ overall could be less than 7% for the cryptoasset market,” the report notes.
Comparing this involvement to that of the traditional equities market, Binance Research elucidates that the institutional participation rate “represents only one-thirteenth of that for the U.S. stock market.”
When considering the fact that institutions currently account for a minute portion of the overall markets, it is clear that there is still a significant amount of capital sitting on the sidelines just waiting to be invested.
Cryptocurrency Markets May Have Already Found a Bottom
Aside from a plethora of data regarding the massive potential the crypto markets still have to garner greater institutional investment rates, the Binance Research report also demonstrates that there is a strong likelihood that the cryptocurrency markets have already established a long-term bottom.
The report notes that the most recent period of high correlation between Bitcoin and the aggregated altcoin markets lasted 90 days until March 14th, marking the longest period of “peak correlation” in crypto-history.
As for what this means for the markets, Binance Research states that market sentiment likely found a local maximum during this period, which means that a “trend reversal may…ensue.”
“Having emerged from a period of the highest internal correlations in crypto history, the data may support the notion that the cryptomarket has already bottomed out,” they explained.
The recent statistics and data shared by Binance Research ought to be overwhelmingly positive for embattled crypto investors, as it demonstrates that the markets are still in the early stages of wide-spread adoption, and that they have already established a bottom that will ultimately lead to a trend reversal.
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