On Tuesday, Tabb Group said, this is the year that institutional money comes into the crypto currency market, thanks to the maturation of trading infrastructure.
“If 2017 was the year cryptocurrencies went mainstream, then 2018 is certainly shaping up to be the year they go institutional,” the capital markets research and consulting firm said in a report by senior analyst Monica Summerville and colleagues.
Crypto currency traders have been expecting institutional money to come into the market. While many people expected that the introduction of Bitcoin futures on major US stock markets in December would have helped, Bitcoin has dropped more than half its value since then.
According to CoinMarketCap, the market capitalization of all crypto currencies has halved from 800 billion dollars in January to around 400 billion dollars this month.
Three main obstacles – legal uncertainty, inadequate market infrastructure and institutional-grade data sources – prevent institutions from participating in the crypto currency market, the report says. This has driven much of the institutional trading volume into off-exchange trading, which ranges from $150 to $300 billion dollars in daily trading volume, analysts said, comparing it with the early age of the now 5 trillion dollar big foreign exchange market.
But “the newest technology providers entering this space are led by people from the wholesale financial markets who claim they have spotted a significant market gap waiting to be filled,” the analysts said.
“The word on the street is that significant additional institutional money is being amassed and is waiting for the right conditions to enter the market — and expected to start doing so this year.”