Today, the number of institutions investing in crypto is growing. These are financial, technological companies, funds, family firms, etc. In this article, we’ll focus on motivations and obstacles institutional crypto investors face today.

Institutional Services and Opportunities that Motivate Today’s Crypto Investors

Here are some factors that contribute to the institutional trading of crypto:

  1. Institutional-grade exchanges. An institutional crypto platform is software that allows investors to buy and sell assets in large amounts, ensuring sufficient liquidity for quick and efficient trading, low fees, tools, and comfortable infrastructure for large trades.
  2. Market making. By partnering with a crypto market-making company (a crypto exchange), an investor can receive reduced fees and earn on frequent trading activity.
  3. Tokenization – provides new opportunities for fractional ownership and increased liquidity in traditionally illiquid assets, such as real estate or art.
  4. Quality research. An institutional cryptocurrency platform offers investors in-depth analytics and tools for understanding trends, assessing risks, and making decisions.

What Still Causes Doubts?

The first aspect for an institution to think about is custody. Choosing the best option depends on the company’s goals. If they are planning long-term crypto allocation without the need to use coins daily, they should look for a company or an institutional trading platform that provides cold storage of funds. A cold wallet is hard to get hacked, as its owner has a password and identifier for the assets they own. However, it takes a couple of days to take those assets off storage and trade them in the digital world. 

There are also some interesting technologies, called “multi-party computations.” It means an investor can break their private key into some pieces and store them in different spots. This type of storage has a lot of security aspects, but at the same time, it allows investors to reach and use crypto regularly. Crypto-native hedge funds and macro funds use such types of custody (warm custody).

Another concern is regulations. On the one hand, regulations aim to promote innovations, but on the other hand, they want to protect investors and get rid of bad actors in the industry. Countries like Singapore, for example, are actively developing regulations and jurisdiction in the crypto space. The U.S. and European regulations are working hard at building a clear regulation oversight of crypto companies to protect investors, bringing licensing, compliance with laws, etc. 

Final Word

Regulations on the crypto space are still under development, the industry is now at its transition stage, which is why many investors still stay aside. Still, the crypto space offers plenty of attractive opportunities for investors, including efficient trading, market making, and participating in the evolving digital world.

By Grace