The entrance of the institutional market at the end of 2017 has led cryptocurrency traders through an emotional rollercoaster, from gigantic gains to tremendous losses. The market kept bleeding until it found its low in February 2018. Analysts predict there will be a surge in institutional demand this year, which could drive again prices to new highs.
Institutional Traders May Drive Next Bullish Momentum
Institutional investors may be about to board the cryptocurrency market with new added strength as governments and central banks produce more regulatory clarity regarding the asset class, which removes uncertainty. With institutional traders moving in, the current market share dominated by retail players is likely to be reduced.
Adrian Lai, co-founder of Orichal Partners, a cryptocurrency investment firm in Hong Kong, points to lack of regulatory oversight and institutional investment as the reason for irrational behavior in the market. More regulation reduces market manipulation and volatility, and attracts institutional participants. “Regulators are not banning the development of cryptocurrencies, but are trying to better regulate the market, which should help the industry mature,” Lai said. “If the regulatory stance gets clearer, large funds will be more assured and willing to commit significant capital”, he added, as he notices a significant increase in interest from asset managers and private banks.
Governments worldwide are more active than ever in overseeing this asset class and initial coin offerings as they aim to drive out fraud to protect consumers. Jay Clayton, chairman of the US Securities and Exchange Commission (SEC), says distributed ledger has “incredible promise for the financial industry” and the increased regulatory oversight will benefit the market and help it mature overall.
Vicky Redwood, global economist for Capital Economics, is more bearish when it comes to cryptocurrencies and expects Bitcoin to move downward as investors are likely to realise “it is simply not a credible long-run alternative to conventional currencies”.
Financial moguls, including Rockefeller, George Soros, the Rothschild family, and others, already their sights set on Bitcoin.The Soros Fund Management venture internally approved the trading of virtual coins in the past few months. Soros called cryptocurrencies a bubble in January of 2018, just before Bitcoin losing over 40% of its value. As the dip seems to be at an end, the big players are moving in.
The new wave of institutional flows into the cryptocurrency market will be dealing with less uncertainty as governments provide a more robust regulatory framework. This may be the beginning of a mature market.
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