The notion of a bulge bracket institutional investment firm such as Goldman-Sachs or Morgan Stanley dipping their toes into the crypto market, could be a game changer. However, numerous ICO scams that popped up in the last few years, is undoubtedly not instilling confidence among investors. Despite the healthy scepticism prevalent around, Blockchain and crypto, last year, witnessed some intriguing developments in the traditional market, some that could lead to investors take the leap for select big ticket opportunities.
Blockchain technology and one of its major applications-cryptocurrencies are already making waves in a score of industries, in the short span of just ten years since its inception. Yet for these technologies to achieve its utmost potential, they need to scale to reach a global platform. Institutional money can go a long way in helping these technologies reach a truly global platform.
For a long time a majority of the big banks stayed away from crypto and blockchain space and yet last year The New York Times reported Goldman-Sachs had plans of setting up what seems to be the first Bitcoin trading operation at a Wall Street bank. The bank doesn’t intend on buying or selling Bitcoin, although a team at the bank was also exploring that option. Instead, the bank was planning on using its own money to trade with clients in a variety of contracts which is linked to the price of Bitcoin. This does not imply Goldman-Sachs is taking the plunge into the crypto world instead, the company is testing the waters. As Rana Yared; a Goldman-Sachs executive covering the bank’s new venture was quoted saying “I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world,” and “For almost every person involved, there has been personal scepticism brought to the table.” This statement clearly reflects the reluctance of institutional investors to step into the crypto market.
In November of 2018, KPMG released a report, in which the company boldly argued the growth prospects of the crypto space, swiftly followed by a detailed analysis on why there is a need for institutional investors in the market. The company believes institutionalization is a necessary step towards mass adoption of cryptocurrencies and will help in boosting the trust of the public in digital assets. As the auditors were quoted saying “Institutionalization is the necessary next step for crypto and is required to build trust, facilitate scale, increase accessibility, and drive growth.” Interestingly, KPMG believes the huge price fluctuations of Bitcoin is not because it is inherently volatile but instead, because of fluctuating demand for the cryptocurrency. These erratic prices could eventually stabilize once the market matures.
Select venture capitalists, in the past few years, went from being on the sidelines of the crypto market space to nose-diving right in. Venture funds solely dedicated to, crypto and akin technologies, made headway into the industry. A good example would be that of American VC firm Andreessen Horowitz, last year the firm pledged a $300 million fund that it would use to focus on promising Blockchain projects and network protocols. Chris Dixon,General Partner at Andreessen Horowitz was quoted saying “We plan to invest consistently over time, regardless of market conditions. If there is another ‘crypto winter,’ we’ll keep investing aggressively”. According to InWara’s private funding database, The company has already made investments in well-known startups such as Coinbase, Ripple and Dfinity.
Andreessen Horowitz invested aggressively in crypto and Blockchain this year despite the lingering ‘crypto winter’. To understand more about this enterprising VC firm and its strategic investments. Check out InWara’s article.
The Blockchain and crypto market space is still in its nascent stages and faces a multitude of challenges ahead-both on the regulatory and legal front before it can achieve a truly global impact. These shortcomings have kept institutional investors on the sidelines and that has impacted mainstream acceptance of these technologies, besides providing the financial backbone needed for the market to mature. Some Blockchain enterprises like Bakkt are looking to onboard investors through its multifaceted platform.
Bakkt plans on launching a physical Bitcoin Futures platform that aims on ‘building an open, seamless global network to enable you to buy, sell, store and spend digital assets simply, safely and efficiently’. Bakkt is the brainchild of Intercontinental Exchange-ICE, the company that owns and operates 12 regulated exchanges and marketplaces, like the New York Stock Exchange.
The legacy that supports Bakkt is what sets it apart from the myriad of Blockchain enterprises in the industry, and is one reason why its new platform is so anticipated. To know more about Bakkt’s Physical Bitcoins Future and the impact it could have on the industry check out InWara’s article.
Governments and regulatory authorities play a significant role in deciding if institutional investors take a plunge into the crypto space. In countries where there are more crypto friendly rules and regulations, wide-scale adoption of these technologies have been observed. Singapore and Switzerland being some the key participants.
Singapore and Switzerland are among of the few nations in the world, which Blockchain and crypto enthusiasts hold in high regard. The countries even being monikered as the “the crypto hub of SouthEast Asia” and “ the crypto country of the world. The governments of both countries have demonstrated on several occasions their benign attitude towards these technologies. Like when The Monetary association of Singapore instilled confidence in investors and entrepreneurs alike, when it welcomed entrepreneurs and visionaries of crypto space, to the Singapore consensus 2018. Similarly, in Switzerland, the Swiss Financial Supervisory Authority-FINMA approved Falcon Bank’sambitious plans of allowing its clients to directly trade certain cryptocurrencies with other users and also have the additional option of converting them into fiat currency. To sweeten the deal FINMA even approved plans of setting up a Bitcoin ATM at Falcon’s headquarters in Zurich.
According to InWara’s ICO+STO database, The US is the global leader in terms of number of ICOs with 289 in the year 2018 from 174 ICOs the previous year. These numbers are impressive but in terms of growth, the ICO sector in the US grew only by 66%. While in Singapore, UK and Switzerland, the sector grew by an impressive 193%, 140% and 145% respectively.
These impressive growth numbers could be a product of the progressive stance of governments and regulatory authorities of the countries on crypto and Blockchain. While in the US, SEC has been clamping down on ICOs with more stringent regulation, which probably resulted in the depreciating trend.
Article sourced from Inwara.com