Institutional Investors are Quietly Adding Cryptocurrencies to Holdings
Institutional investors are becoming more involved in the $220-B cryptocurrency market than many observers may realize.
Buyers such as hedge funds have replaced HNWIs (high-net-worth individuals) as the biggest buyers of large lots of digital coins worth more than $100-K through private transactions..
The Big Sellers
Big sellers are miners, some have begun scheduling regular coin sales instead of holding or waiting to offload them during market rallies. Many of the largest miners have also set up their own liquidity desks and operations.
The OTC market facilitated anywhere from $250-M to $30-B in trades per day in April, according to researchers including Digital Assets Research and TABB Group. Exchanges have recently handled about $15-B in daily trades, according to CoinMarketCap.com.
While the OTC market has declined along with crypto prices, it has not dropped as much as volume on exchanges, which is down 80% since its peak late last year.
Large buyers and sellers like private sales because transactions on exchanges can move coin prices. In a private sale, parties can fix the price in advance, instead of worrying about a sudden plunge or spike just as the transaction takes place.
The large miners sell their coins to sellers directly or through brokers.
And now, because more and more institutions are beginning to enter the market, there is more of an imbalance in the exchange markets. That’ is why brokerage firms are springing up to help institutional buyers find inventory.
Extra Added Benefits
The miners can offer something unique: brand-new, “virgin” coins, which some investors covet. Such coins command a premium of up to 20% as, it is easier to prove they have not been involved in money-laundering operations.
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