Why next year could be the year institutional investors
Over the past six months, the correction in the cryptocurrency market have generated a lot of skepticism. But in fact, the current “Kriptonika” — perfectly healthy and natural purification of the ecosystem. Price drop separates long-term, prospective projects from short-term, designed exclusively for rapid enrichment. Sooner or later, to replace the winter comes cryptobiina, and to accelerate the onset of committed institutional capital. Here are six reasons why 2019 could be the year of institutional investors into the cryptocurrency market.
1. Us regulators have adopted a constructive position
A similar process occurs around the world: the authorities in different countries have gradually come to the realization that cryptocurrencies with us for a long time. However, the industry still remains a lot of unresolved issues:
Search and punishment of persons who defraud investors with fake IPOs of coins;
Definition of the difference between investment and service tokens;
Industry engagement on the development of adequate regulations that protect the interests of investors and not impeding innovation.
In General, the industry and regulators are moving in the right direction, although the development of unified standards could take several years.
2. Cryptocurrencies offer a unique combination of yield and volatility
The attractiveness of a digital asset due to their relatively low correlation with other asset classes such as bonds (negative correlation) and gold (zero).
In other words, cryptocurrencies are the perfect tool for diversifications consisting of stocks and bonds. Studies show that 2-percentage of digital assets can increase portfolio returns by about 2%. 5-the percentage increases the yield by more than 5%, almost twice exceeding the figures of the reference portfolio of stock/bonds. At the same time, the high volatility of bitcoin and other digital currencies may be of interest to financial managers seeking to outperform the returns of the market.
3. In near future there will be storage scriptaction institutional level
It is now an urgent need for services that ensure the safekeeping of digital assets. Very few of the offerings meet the strict security requirements set by regulators and institutional investors. The newly popular crypto currency exchange Coinbase in partnership with Electronic Transaction Clearing (ETC) has launched its own Depository. Similar services have begun to provide ItBit and Xapo. These companies will surely follow.
4. The growing popularity of cryptocurrency futures, derivatives and forward transactions
The volatility of cryptocurrencies in the beginning of the year seriously has spurred demand for derivatives products. With their help, investors can participate in the rise or fall of prices without owning the asset itself, use them for hedging and minimize losses (as in the case of conventional currencies). Many exchanges do not allow direct selling of bitcoins, however, investors can speculate on prices by trading futures on certain sites, such as BitMEX, LedgerX and OKCoin.
In addition, the institutional investors have used futures contracts to influence the value of cryptocurrencies (especially bitcoin). In December last year, the futures began to offer bitcoin Chicago Mercantile exchange (CME) and Chicago Board options exchange (CBOE).
5. A positive decision on exchange traded Fund — a matter of time
There is a clear need in the sector or market exchange-traded cryptocurrency Fund, which will help investors to diversify risks. Applications for ETF to the Commission on securities and stock exchanges of the USA (SEC) has filed a company (including Gemini and Bitwise), however, the regulator so far no one has not endorsed.
However, the SEC with respect to this issue is slowly changing. Now the regulator is more concerned about the fight against fraud on the platforms that offer ETF, rather than by the funds themselves. Most likely, the positive regulator’s decision — coming months.
6. Appear cryptocurrency products from major financial institutions
Digital assets have attracted the attention of institutional investors. Such large financial companies as Goldman Sachs, Fidelity and Blackrock, have begun to develop crypto products and became interested in blockchain technology.
Goldman is going to start a unit on trade cryptocurrencies. A year ago, Fidelity introduced cription and are currently actively forming a team of professionals to provide custody and related services. Blackrock, the world’s largest management company, recently announced plans to enter the bitcoin market futures. In the future industry probably will be new large players with a rich offer of investment products based on the blockchain.