The central theses
- Insufficient market capitalization has deterred institutional investors from entering the cryptocurrency industry.
- Regulatory uncertainty and immature market infrastructure are also some of the main concerns of high net worth individuals.
- As Wyoming state regulators weaken their position on digital assets, the ground floor improves for better market conditions.
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A new study reveals three key factors that are still preventing institutional companies from investing in the cryptocurrency market.
The crypto market is not ready for institutional investors
eToro released a new research report that assesses what is needed before institutional investors can enter the cryptocurrency industry. One of the main obstacles in the study is the lack of adequate market capitalization.
Although the crypto market recently hit the headlines after topping $ 1 trillion for the first time in his brief tenure, that number needs to double to attract more wealthy individuals.
The current legal framework also poses a threat to wider application. This has an impact on the market growth towards infrastructure and standards for businesses, as those who want to contribute to the blockchain ecosystem have limited access to credit lines.
Tomer Niv, head of business development at eToroX, believes that a new wave of institutional capital would flood the room once more regulatory clarity is achieved. After that arrival, the child’s infrastructure would find the means to continue growing.
“From a market infrastructure perspective, more needs to be done to make this group of investors feel comfortable joining the crypto ecosystem. Only by expanding the playing field and allowing greater participation can crypto reach and maintain a market cap of $ 2 trillion and beyond. Said Niv.
The report also found that institutional actors feel burdened by the complexity and risk of storing private keys. Instead, they prefer reputable funds and crypto ETFs to solve these security issues and make their entry smoother.
Although Grayscale’s Bitcoin purchases have shown strong interest from institutional investors in recent weeks, demand will increase through infrastructure solutions for businesses like FIX APIs and cold stores, according to Niv.
A sharp drop in prices from current levels, pushing BTC below $ 25,000, could also help attract the attention of “large tier 1 banks and individual investors”.
As Bitcoin enters a new phase of correction and the Wyoming State Banking Board gives Avanti the green light to launch America’s second cryptocurrency bank, it may only be a matter of time before the cryptocurrency market provides the right conditions for institutional investors.
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