Factors Impacting Institutional Participation in Crypto

Over the last ten years, cryptocurrency has become a more promising and legitimate type of investment. Innovative technologies and high returns from top cryptocurrencies suggest that big investors will likely get involved. Yet, 15 years since cryptocurrencies emerged, big investors have not wholly joined in. Many are waiting, carefully checking everything before they invest in this new area. This article will explain the factors that impact the institutional adoption of cryptocurrency and why many investors still stay out of the crypto market.

Barriers to Institutional Crypto Allocation

While companies and businesses see all the benefits of investing in crypto, something still holds many of them back. One main reason is the unclear rules around cryptocurrencies. Another reason is that cryptocurrencies are still very young and don’t have a solid history. However, there are now many positive changes happening. These include changes in rules, better market infrastructure, and increasing interest, which could help solve these issues. Let’s see what impacts the growth of institutional crypto trading.

What Stimulates the Growth of Institutional Crypto Investments?

Here is how the crypto sector changes and what positive shifts it gives to institutions:

  • The rise of institutional crypto trading exchanges (like WhiteBIT Institutional) garnered investors’ attention. Such platforms implement robust security measures to protect their clients against hacks. They comply with regulatory standards and cooperate with authorities to improve regulations and maintain the attractiveness of crypto products. Crypto exchanges offer advanced tools for trading, risk management, market analysis, educational content, and personal assistance for institutions that enter the market.
  • Another factor that changed investors’ attitudes to crypto is that Bitcoin has been recognized as decentralized enough to be called a commodity instead of a security. It makes the rules clearer for the most well-known digital currency and creates a guideline for other digital assets that are decentralized similarly.
  • The development of the market infrastructure for cryptocurrencies is progressing significantly. The two biggest digital assets, Bitcoin and Ethereum, have regulated futures products available for trading on the Chicago Mercantile Exchange (CME).
  • Another positive event in the crypto space took place in January 2024 – the Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. It adds a layer of legitimacy to Bitcoin and contributes to the broader institutional allocations to crypto. Having a Bitcoin ETF approved by a major regulatory body like the SEC signals to investors that Bitcoin is a recognized and valid investment asset.

Despite common barriers, institutional investors in cryptocurrency are slowly but surely entering the market. With increasing regulation and the development of a more secure and reliable infrastructure, we will likely continue to see a growing interest in cryptocurrency from institutional investors.

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