Institutional Players Need to Work Hard for Crypto to Grow
It has often been stated that institutional players are necessary if the cryptocurrency space is going to ever serve as a legitimate and mainstream financial marketplace. For crypto to ever rank amongst cash and credit cards, professional traders must have a hand in how the assets are traded and sold.
However, it’s been widely believed that institutional traders look to avoid crypto every chance they get given that bitcoin and its many altcoin cousins are often prone to widespread volatility and price swings. Thus, cryptocurrencies can lose everything just as easily as they can double their prices overnight. This scares many professional traders and makes them turn away to stocks, gold and other assets that have proven more “trustworthy” over time.
However, now it looks like institutional and professional traders are more active than we may have been led to believe. According to new data from blockchain analytics firm Chainalysis, institutional players are extremely active in the space and now account for more than 80 percent of all USD value in bitcoin that’s sent to digital currency exchanges. In addition, the firm states that most of these individuals treat bitcoin like they would gold. They behave as though BTC is a store of value and typically look to keep it long term.
In a new report, researchers at Chainalysis explain:
Professional traders are those most significant contributors to large market movements, such as those seen during bitcoin’s dramatic price decline in March as the COVID-19 crisis intensified in North America and beyond. However, professional traders are still few, moving all that value in just 29,000 transfers per week on average in 2020.
For the most part, however, while institutional traders still account for the most significant moves in the crypto space, their presence doesn’t compare with that of retail players, which according to Chainalysis, accounts for more than 95 percent of all general account transfers each week.
The Virus Has Helped BTC in a Strange Way
Still, it cannot be denied that bitcoin and cryptocurrencies have exploded in recent weeks as more people show fear and concern surrounding the spread of the coronavirus, which according to many sources, is now headed for a second wave throughout the U.S. and abroad. Chainalysis stated in its report:
The data shows that the majority of bitcoin is held by those who treat it as digital gold: an asset to be held for the long term. With more people looking to trade bitcoin, which is only becoming more scarce following the recent halving, bitcoin moving from the investment bucket into the trading bucket could become a crucial source of liquidity.