We’ve heard through the grapevine that institutional players are accumulating cryptocurrencies en masse and in vast sums via OTC orders.
Unlike the Mt Gox Trustee Nobuaki Kobayashi who has dumped more than 35,000 BTC on exchanges from December 2017 – a highly irresponsible move in our opinion – institutional players are choosing to buy much more discreetly.
Buying OTC provides large organisations with the ability to gain exposure to cryptocurrency without having to register with a third party like Coinbase.
We all know how fast the market price can move and OTC deals therefore provide an avenue for large quantities of supply to be delivered at a fixed rate, either over time or at once, without influencing the market price.
Additionally, institutional players may also not want to entrust exchanges which are largely unregulated and uninsured with massive sums of their money. Buying cryptocurrency over the counter mitigates this risk.
As more institutions and big players enter the space – think HSBC, Soros Fund Management, Passport Capital, Goldman Sachs and Barclays – strategy will become increasingly important.
If information is leaked about one entity buying a specific cryptocurrency then this arms their competitors with knowledge about the investment strategies and portfolio construction of their competitors.
If we truly are in the institutional accumulation and portfolio construction stage now then the question which arises is what comes afterwards?
We can’t predict the future but we would expect that institutions would like to see their large OTC investments grow.
Despite the current bear market, we still view the long-term potential of Bitcoin and the overall cryptocurrency asset class as very promising, especially when compared to the equities and fixed income market which are well overdue for a correction.
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