Crypto Institutional Investment: Problems and Solutions

Crypto Institutional Investment: Problems and Solutions - Blog Lorelei Web Design

Institutional investors in crypto started in 2018 after Bitcoin had become a mainstream crypto asset. Grayscale Investments, MicroStrategy, Galaxy Digital, JPMorgan, Citigroup, and many other companies joined the crypto sector. These are tech companies, financial entities, funds banks, and other organizations that allocate a portion of their portfolios to digital assets.

However, many investors still sit on the sidelines. This article explains the factors deterring institutional buyers and the solutions institutional exchanges offer.

Where Institutional Cryptocurrency Trading Takes Place

Large market players like funds or financial entities often act on behalf of their clients and, in their best interest, try to ensure the highest level of protection for their funds. This is the reason why regular crypto trading platforms do not meet the institutional requirements. WhiteBIT institutional crypto trading, on the contrary, offers robust security for users with additional services and tools that facilitate efficient trading. Now, let’s discuss institutions’ concerns about trading crypto and how institutional exchanges solve them.

Deterrents for Institutional Traders

Here are the main investors’ concerns deterring them from buying digital assets:

  1. High price volatility.
  2. Lack of clear regulations and the constant evolution of legal frameworks around crypto in different jurisdictions.
  3. The history of hacks and thefts in the crypto space raises concerns about asset security.
  4. Lack of infrastructure. 
  5. Liquidity issues. 
  6. The need for secure storage solutions, understanding blockchain technology, and dealing with the tax implications of crypto transactions can be daunting.

How Institutional Exchanges Solve the Main Issues of Institutional Investors

Here are the solutions by institutional crypto exchanges:

  • Advanced security (multi-signature wallets, regular security audits, offline storage, and insurance).
  • Compliance. Institutional exchanges strive to comply with existing financial regulations, engage with regulators, and implement rigorous know-your-customer and anti-money laundering procedures (e.g., crypto AML check on WhiteBIT) to provide a compliant trading environment.
  • Improved market infrastructure. Development of professional-grade trading platforms with advanced trading tools, reporting features, and API access to integrate with existing financial systems.
  • Enhanced liquidity. Generating liquidity from various sources, offering deep liquidity pools for institutional buyers without significant market impact.
  • Risk management (derivatives, futures, options, and other financial instruments) allows for hedging against price volatility.
  • Educational resources and dedicated support teams assist with the operational complexities of trading and investing in crypto.
  • Custody solutions tailored for institutional investors ensure the secure storage of digital assets.

Institutional crypto exchanges are bridging the gap between traditional financial markets and the digital asset space by addressing these key concerns. They offer institutional investors a more familiar, secure, and compliant environment. It helps reduce barriers to entry and encourages greater institutional participation in the crypto market.

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