Bitcoin’s recent price drop from 2019 highs of $14,000 to the current doldrums of around $8,000 would typically send investment in the digital currency right down. The hype and enthusiasm around Bitcoin is often directly tied to its price and performance.
However, it appears that all the talk of a maturing market and institutional interest may well be true as a London-based OTC cryptocurrency firm, BCB, has reported very little loss in interest from their institutional clients despite the recent bearish downturn in the price of the coin.
While the glory days of the initial Bitcoin hype saw a lot of trading at well-known exchanges, such as Coinbase, Binance, and others globally, there is an increase in over-the-counter trading by institutions according to BCB. Investors typically opt to purchase cryptocurrency OTC to avoid slippage due to a lack of liquidity on exchanges.
This is where BCB has maintained that the levels of investment have remained significant, with “tens of millions of pounds” being traded on a weekly basis. It is a sign of a maturing market, and an introduction of a different type of client as market swings would not influence institutional buyer’s decisions that much.
“We’ve definitely seen a rise in investments from institutions, but more importantly, we’ve seen less of the hype from the retail sector. We’re starting to see fundamental changes in this space. Bakkt have launched physically settled Bitcoin futures, Facebook has announced Libra, and you have insurance companies like Allianz getting involved in blockchain technology,” One of the firm’s directors, Daniel Fruhman, said.
“We’re less interested in the price. We look at other metrics that signal strength such as Google Scholar citations about Bitcoin, GitHub commits, VCs investing in space, and jobs being taken for blockchain and crypto developers. These are the really important strength indicators for this industry.”
The director also went on to discuss how the change in the marketplace has become a welcoming environment for institutional money to enter, thus maturing it further, and making the worry and fixation on price less important.
“Two years ago, you could just arbitrage spot on exchanges and make a lot of money,” Fruhman added.
“But that’s all you could do. Now more recently with Deribit, LedgerX, Bakkt, and CME, you can trade futures and options, and there are some interesting arbitrage opportunities there. But this is still only really the beginning. All of these financial products that hedge funds are used to in traditional markets will eventually come to crypto.”
Institutional investment in Bitcoin still remains high on the list of priorities for those involved in the space for they have identified its adoption hinges on such interest. Tools such as Bitcoin ETF continue to be a pipedream, but there are other alternatives that are catching winds in their sails now.