In September 2017, the Bank of America Merrill Lynch branch asked 200 institutional investors what they believe is the most popular investment. Most of them said “Long Bitcoin.” That said, this doesn’t mean these investors have put money into the digital asset. However, it does show the government how vital cryptocurrencies are in the long run. But, that doesn’t change the fact that the crypto market needs institutional investors to take off. Thankfully, there is some hope in that regard thanks to recent developments.
Prepping For The Future
As of this writing, “established financial institutions” are finally preparing to work with Bitcoin and other cryptocurrencies. Groups like Fidelity, one of the biggest asset managers in the world, revealed it would start supporting crypto trading and offer custody platforms within the next few months. Then, we have the Intercontinental Exchange which is getting ready for a Bitcoin futures exchange called Bakkt. Later, other places like American universities such as MIT and Harvard are creating cryptocurrency funds. This is just the start.
It remains to be seen, then, why the value of Bitcoin hasn’t taken off despite these accomplishments. Instead, market optimists are looking for any small positives we can find.
Unfortunately, Bitcoin broke the $6,000 low investors had established for it late last year and is now stuck around $3,000. Whales are holding steady, but new investors are failing to enter the market. Plus, we need institutional investors over smaller common ones.
Of course, a significant limitation here is a lack of any framework for investors to follow regarding Bitcoin. P.A.I.D. Strategies recently released a report that claims 68% of Bitcoin exchanges across the United States and Europe aren’t even compliant towards know-your-customer policies. Plus, a decent amount of these exchanges can’t even liquify Bitcoin or other assets. That’s not a good pitch for new investors with lots of money to enter the market.
John Devlin, a head analyst at P.A.I.D. spoke on this:
“Cryptocurrency wallets and exchanges want to enjoy the same trust as the wider financial services, but for this to happen they need to rise above the sometimes-dubious reputation of cryptocurrencies’ past and be seen as ‘model citizens’ of the economy.”
Of course, this burden relies mostly on cryptocurrency exchanges, as these are key entry points into the digital asset market.
Doing Their Part
Fortunately, Tony Sio, the head of surveillance and marketplace at Nasdaq, recently spoke on the matter, saying that crypto exchanges are doing what they can to improve their offerings.
He goes on, speaking to Business Insider and saying that a decent amount of exchanges are asking Nasdaq to use their SMARTS Trade Surveillance system. This network is used by traditional exchanges, brokers, and regulatory officials to watch over trading and keep an eye on possible market manipulation.
That said, because Nasdaq screens platforms before allowing them into the SMARTS platform, Sio claims that he’s seen a good amount of crypto platforms with poor KYC/AML policies.
To be fair, these barriers aren’t always easy to implement. “If you are a startup, it is quite hard to set up because it requires a fair bit of work to set it up fully in place,” says Sio. “That is probably one of the sticking points.”
Nevertheless, some crypto exchanges have been approved by Nasdaq. Those in the green are utilizing surveillance technology, trading engines, clearing engines, and more. This is a great sign, as it shows exchanges are putting effort into showing themselves as ideal candidates to follow. If this continues, institutional investors will be more likely to jump into the market despite volatility and other longstanding issues.