According to market research firm Tabb, 2018 could be the year that ‘institutional money’ finally enters the cryptocurrency market. Tabb identified a few key reasons why established money managers and the planet’s largest financial powerhouses might now be getting ready to make their move into the space.
Tabb: There Are Three Reasons Why Institutional Investors Remain Cautious of Crypto
According to report on CNBC’s website, the market researchers have published a document by one of their senior analysts along with other contributors. Monica Summerville and colleagues write:
“If 2017 was the year cryptocurrencies went mainstream, then 2018 is certainly shaping up to be the year they go institutional.”
Many cryptocurrency investors believe that an influx of money from traditional centres of finance is inevitable. Some believed that the launch of Bitcoin futures by the CME Group and Cboe late last year would be the catalyst for this. However, it hasn’t quite panned out that way. It wasn’t long after the launch of these products that the price of Bitcoin began its sharp decline from a high of nearly $20,000 right down to just above $6,000 in early February.
According to Tabb, there are three main obstacles stopping institutional investors taking up positions in cryptocurrency. These are current uncertainty about regulations, lack of market infrastructure, and lack of institutional-grade sources of market information. These three factors combined have forced what little institutional interest there has been in Bitcoin and other cryptocurrencies to make over-the-counter (OTC) trades. The authors of the Tabb report estimate that these account for between $30 billion and $150 billion in daily trading volume. The document goes on to state that:
“The word on the street is that significant additional institutional money is being amassed and is waiting for the right conditions to enter the market — and expected to start doing so this year.”
With more regulatory bodies starting to consider cryptocurrency across the globe and trading desks expected to be launched by Goldman Sachs along with other established Wall Street banks later this year, it seems that at least two of Tabb’s obstacles to institutional cash will be removed in the coming months. This could well see the kind of influx of money needed to prove some of the most bullish price calls right.
Predictions such as that of Tom Lee’s $25,000 Bitcoin by the end of 2018 or even Alexis Ohanian’s $15,000 Ether token in the same period of time seem little but a pipe dream without serious financial institutions having easy access to exposure in cryptocurrency. Time will tell if Tabb’s thinking is right on the subject of institutional cash entering crypto.
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