A new report from advisory firm Aite Group, prepared in partnership with eToroX suggests that the barriers to institutional entry in cryptocurrencies are decreasing. However, insufficient market capitalization continues to be a problem for large investors.
What are institutions worried about?
According to the report, 5 key factors can play the most crucial role in increasing the adoption of crypto assets by institutional clients. This includes technological innovation, market liquidity, the role of credit, security and custody, and market structure.
Institutional investors have increased their presence in the crypto markets. This has been possible because of the reduction in immature market infrastructure and the removal of security issues. However, the institutions are still worried about the insufficient market capitalization in the market.
What does the crypto market need?
According to the report, the crypto market needs smoother access to credit to make it a fertile ground for institutional players. A total of 25 market respondents have outlined the importance of price transparency and the ease of market access as well.
The report outlines,
“Obstacles to institutional adoption still exist, but these barriers are gradually coming down thanks in large part to innovative crypto-native market participants that have risked the survival of their business on the initial growth of the institutional crypto asset market. The final wave of growth must be led by the traditional institutional market participants and driven by increasing regulatory clarity, improved market infrastructure and cutting-edge technology.”
Despite the ongoing struggles in the market, major investors have already started accumulating Bitcoin. Companies like MicroStrategy and Mass Mutual has already acquired Bitcoin worth billions of dollars. Some Wall Street firms have also started showing an interest in their business. The world’s largest crypto asset management firm Grayscale has also shown faith in Bitcoin. Its latest quarterly report shows that over 90% of its demand is coming via institutions. Even though adoption in this sector cannot be compared to that of gold and traditional stocks, it is showing good signs of growth.
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