Institution Investors have been using the back door for buying cryptocurrencies
In recent times, it has come to the notice that Institutional investors are actively participating in the $220 billion cryptocurrency market, more than what was originally predicted.
According to Bobby Cho, global head of trading at Cumberland, (Chicago-based cryptocurrency trading unit of DRW Holdings LLC), that keeps track of the over-the-counter purchases, “high-net-worth individuals originally known as the biggest buyers of large swaths of digital coins worth over $100,000 through private transactions are being replaced by Buyers like hedge funds.
Cho also said, “What does this depict about the professionalization that’s happening across the board in this sector,” further adding “The Wild West days of crypto are really turning the corner.”
According to researchers that includes Digital Assets Research and TABB Group, for every single day in April, the over-the-counter market facilitated nothing below $250 million to $30 billion in trades.
According to data provided by CoinMarketCap.com, recently approximately $15 billion has been handled by Exchanges in daily trades.
In an interview Jeremy Allaire, the chief executive officer of Boston-based Circle Internet Financial said, we have witnessed triple-digit growth enrolling in our OTC business,” further adding, “That’s an incredibly large growth area.”
According to Digital Asset Research, the OTC market, as well as crypto prices have dropped down but not so drastically as the volume on exchanges, which is down by almost 80 percent since its peak.
Cho claims that a majority of the institutional buyers have favoured crypto recently mainly as the wide swings in prices have gone down.
In a statement Cho said, “One of the biggest criticisms of crypto by institutional investors has been the volatility,” further adding, “Over the past five to six months, the market has been trading in a very tight range, and that seems to be corresponding with traditional financial institutions becoming more comfortable diving into the space.”
Cho also claims that, During Asia hours, nearly A third of DRW’s transactions take place.
Tom Flake, founder of Bcause, a provider of mining facilities that boasts of a clientele including institutional miners with hundreds to thousands of machines had quite an interesting take as he said, “If they are liquidating [coins], they are liquidating them via OTC.”
According to Sam Doctor, managing director and head of data science research at Fundstrat Global Advisers, institutional buyers mostly prefer to buy coins outside exchanges is because quite often exchanges do not offer the number of coins which is desired by them.
In a statement, Doctor said, “At this particular moment, there is more of an imbalance seen because more and more institutions have begun entering the market, there’s more of an imbalance.”
He also added That is one of the main reason why brokerage firms are springing up to offer assistance for institutional buyers in finding inventory.
According to Travis Kling, founder of the hedge fund Ikigai, coins like the latest “virgin” coins which is most sort after by investors can easily command a premium of almost 20 percent.
Kling also said that “it is much simpler to show that these coins are not used in any money laundering rackets.