By David Drake
A survey published by Thomson Reuters has revealed that one in five financial institutions is considering cryptocurrency trading this year. This translates to over 400 financial institutions like large asset managers, trading desks and hedge funds. According to the co-head of trading at Thomson Reuters, this is a sure sign the crypto trading market is entering mainstream financial services industry.
Moreover, in an interview with CNBC, Adena Friedman, Nasdaq CEO, revealed that Nasdaq could become a cryptocurrency exchange in future, if proper regulations are put in place. In the long-term, these developments are likely to have a positive effect on crypto prices.
One of the ways to trading of financial institutions will boost cryptocurrency prices is the rise in the number of investors. According to Joseph Onyero, CEO of Properbuz, the growing interest of financial institutions in cryptos will attract more individual investors through institutional trading platforms, resulting in higher profit margin.
He notes, “Financial institutions interest in cryptocurrency trading is attracting more individual investors who want to participate in crypto markets through institutional trading platforms. This is making the possibility of considerable profits too essential to ignore.”
The entry of financial institutions into the digital currency space will also boost crypto prices through limited supply. The nature of cryptocurrencies is that their supply is limited and is often set at the time of their development.
As such, mainstream financial institutional investments will be seeking to buy huge volumes, which means the demand will be high while supply will be limited, according to Garth Howat, CEO of Baanx. This is likely to result in sustained price gains, especially if people hold their stocks in the long term.
“Crypto is by definition in limited supply, as mainstream financial institutions enable crypto trading we are guaranteed huge increases in participation and buying volumes for Bitcoin and Ethereum as well as many others which will drive sustained price gains, especially if many institutions and people are holding it long term and available supply is becoming even more limited,” Howat notes.
Lower Regulatory Risk
Jori Falkstedt, the CEO of GlobalSpy feels cryptocurrency trading by mainstream financial institutions will boost crypto prices by reducing regulatory risks that attract speculative investors. When this happens, crypto trading will become available to the broader audience.
“The growing interest in cryptocurrency trading among financial institutions will make it more available for broader audience and reduce regulatory risks. More speculative investors such as hedge funds will be more interested in cryptos,” he says.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.