20 June 2018

Institutional Investors in Crypto-Land

I think there are a few things going on around the "institutional investor" theme in crypto-land...

One reason for our not seeing a flood of Big Money into cryptos is that these guys are very, very patient. Their salaries and bonuses do not depend on them moving quickly, and there's a lot for them to do in preparation for tackling an entirely new asset class.

Two is that some heat has been taken out by the derivatives. They can trade without having to deal with the problems of holding actual crypto-currencies — all the custodial challenges and regulatory uncertainties.

Three: They're probably intensively consulting with the regulators. They live in a highly regulated climate, and Legal will want to know exactly when and how they're crossing lines before doing so.

Four: Custodial solutions for large organisations are in hot development, but they're certainly far from developed or tested anywhere close to the levels an institution would require. You do NOT want a billion USD worth of BTC sitting in a hot wallet when some janitor walks out the door with the keys on a flash-stick.

So I think there are, and will be for a while yet, some delays in seeing actual institutional flows into the crypto markets. But they will come. A future contract on the price of BTC may make for nice trading, but it's not ever going to be the same as an investment in the real thing.

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