How Much Institutional Money is in Crypto?
The landscape of cryptocurrency is undergoing a profound shift as institutions increasingly venture into this once-niche space. Institutions are drawn to cryptocurrencies for a myriad of reasons. The potential for substantial profits in a rapidly evolving market, acknowledgment of cryptocurrencies as a valid asset class, and recognition of their transformative potential collectively propel institutions into the crypto sphere. This dynamic landscape offers institutions an opportunity to diversify portfolios, engage with emerging technologies, and participate in a financial frontier that promises both challenges and rewards.
Where Are Institutions Buying Crypto and What Services Do They Get?
Institutions are strategically acquiring cryptocurrencies through various platforms and services tailored to their unique needs. These entities often engage with reputable crypto exchanges that offer specialized institutional services such as:
- Over-the-counter (OTC) trading desks, providing them with efficient execution of large orders.
- Institutional-grade custody solutions ensure the secure storage of digital assets.
- Referral programs and incentives provided by exchanges, foster collaboration and mutual growth.
- Participation in the crypto market also opens doors to market-maker opportunities, allowing institutions to contribute liquidity and potentially earn profits through bid-ask spreads.
- Institutional players often capitalize on consulting services, gaining insights into market trends, regulatory compliance, and risk management. These comprehensive offerings create an ecosystem where institutions can navigate the crypto landscape with confidence, seizing opportunities while mitigating potential challenges.
Institutional Money in Crypto: Who Invests the Most Actively?
Here are the largest investors in crypto:
- MicroStrategy, a widely known platform mainly for business, made Bitcoin its main asset in the last two years, collecting millions of dollars worth of cryptocurrencies. Currently, they own 158245 Bitcoins (the data taken on September 24, 2023).
- Galaxy Digital Holdings, a merchant bank centered on the crypto market, presently possesses nearly 8100 Bitcoins. Since its inception, the company has forged partnerships with top crypto firms, solidifying its position as one of the premier institutional investors in the cryptocurrency sector.
- Tesla, a globally renowned company, entered the cryptocurrency arena in December 2020 by investing around $1,5 billion in Bitcoin. Guided by CEO Elon Musk, Tesla’s journey in the crypto space has been marked by unconventional decisions. Initially, the company embraced Bitcoin as a payment method, but after two months, it reversed this decision, citing concerns about the environmental impact of Bitcoin mining. During the upheavals of the coronavirus pandemic, Tesla opted to sell 75% of its Bitcoin holdings, amounting to approximately $1 billion. As of today, Tesla holds 10725 Bitcoins.
The volume of institutional crypto investments is growing despite the bear trend in the market that started in 2022. With the growing number of investors in this field, crypto services expand to adapt to large market players and offer them the most profitable services. The emergence of large investors is a sign that the future is crypto, so we should keep a close eye on how this market develops in the coming years.