Institutional investors drive strong crypto-currency market

Jun 06, 2019
Trading volume hits all-time high thanks to institutional investment

Institutional investors are driving a strong crypto-currency market, according to data in the latest report from Binance Research.

‘During the past three months, we saw new vigor in the crypto-currency industry,’ the report notes. ‘The total market capitalization of crypto-currencies rose from $130 bn on March 1, 2019 to almost $260 bn as of May 31, 2019, representing 100 percent growth in just three months.’

This follows earlier calls from Boston-based Cambridge Associates for institutional investors to get involved in crypto-currencies.

The Binance Research report highlights the growing trading volumes in bitcoin on the regulated Chicago Mercantile Exchange (CME): on May 13 trading volume hit an all-time high of 33,677 contracts, worth $1.3 bn in BTC, the bitcoin price.

‘Institutional investors, currently representing – in our conservative assumptions – less than 10 percent of all long-term investors, are growing their exposure to digital assets and seven crypto-currencies, as illustrated by a premium of nearly 40 percent for Grayscale Bitcoin Trust over BTC spot price at the end of May,’ the research states.

The research also focuses on the correlation between the US dollar price of different crypto-assets, where bitcoin continues to be the leader in the market that set the level and tone for altcoins. But most of the time, notes the report, market irrationality or so-called herd effect plays the dominant role in defining price fluctuations.

The report further notes some of the developing market aspects of crypto-currencies and Bitcoin: ‘Within this period, the composite altcoin correlation with bitcoin also hit an all-time high. That coincided with bitcoin’s fall from the $6,000 range to the $3,000 range.

‘This high correlation suggests market sentiment has already found a local maximum during that period, and a trend reversal may ensue. Such a price movement pattern, to some extent, may reflect both the irrational behavior of market participants and some inherent traits of a young market.’

That said, the report adds a positive outlook for the future: ‘The crypto-currency and digital asset industry will continue to evolve over 2019, with the pace of evolution potentially accelerating even further if market prices decide to hit the gas pedal.’

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