Institutional Players May Dominate Bitcoin Trading Within 3 Years - Report

Institutional players could dominate bitcoin (BTC) trading in the near future, as surveyed institutions expect asset managers, funds, and banks to be the most significant contributors to trading volume in the next three years, according to a report released by digital asset research firm Arcane Research.

“With the domino effect at play, the trend of rising institutional demand is expected to continue. Some are beginning to dip their toes into the market,” according to the report which was prepared in partnership with institutional crypto exchange LMAX Digital which surveyed its customers.

Respondents showed the strongest conviction that asset managers and funds will dominate the crypto market's trading volume within the next three years, with about 70% of respondents, followed by banks, at about 40%, and brokers, with some 30%.

The “survey results show us that institutional investors still see some issues with the current crypto market, but they expect to be a central part of it in the future,” Arcane Research said.

Comparing the ongoing wave that has fuelled the crypto markets growth and the year 2017, Arcane Research says there is a fundamental difference between now and the events that occurred last time bitcoin topped out.

“In late 2017, the market was fueled by unregulated speculation in ICOs [initial coin offering], totally inconsistent with organic growth,” said the report. “The focus was only on the massive gains investors got in the cryptocurrency market.”

In the current market cycle, particularly in 2020, “the focus has been on institutional investors opening up for this new asset. Its now being reported that public companies like Tesla acquiring bitcoin to hold as a reserve asset, and traditional financial institutions building out offerings to support bitcoin.”

Arcane Research noted a number of established financial players who have gained exposure to the crypto industry through their investment portfolios. Some of the examples include Goldman Sachs injecting funds into digital asset financial services firm BitGo, Visa investing in crypto platform Anchorage, Boston Consulting Group making an investment in digital asset marketplace Bakkt, and BNY Mellon injecting funds into digital asset security platform Fireblocks.

Owing to similar investments by legacy finance players, “bitcoin is becoming increasingly legitimized through the growing market and infrastructure, and continues to attract the attention of both retail and institutional investors as an emerging asset class,” according to Arcane Research.

The firm's latest research has left an impression on Morgan Creek Digital co-founder Anthony Pompliano who tweeted that it was “incredible to see how fast everything is growing, especially the institutional interest across the market.”