Crypto carving out its place in the future of institutional investing. Is the future of crypto institutional?
In a previous article, it has been discussed that a key player in financial sector, the Certified Financial Analyst Institute (CFA Institute) recently included crypto and blockchain as new topics (hyperlink article) in their internationally renowned exam, for those wishing to go in to financial sector. This sentiment has been echoed by other significant financial institutions, with some adding their own crypto funds, trading desks and other services to their existing offerings.
With these changes occurring, the question of institutional adoption of crypto is a matter of how, as much as a question of when. What is required for institutional investors to adopt cryptocurrencies and other digital assets is undoubtedly a strong regulatory environment, diverse product options, and a secure infrastructure and exchange platforms.
When these regulatory and logistical updates are made, there is significant potential for crypto to become its own asset class. At this time, it will up to individual investors to decide how they decide to invest in crypto, based on their investment strategy and objectives. Investors will need to decide between centralised and decentralised infrastructures, both of which have their strengths and potential weaknesses. Centralised and decentralised exchanges are discussed further in a previous article (link first Epoch article).
Decentralised exchanges offer may greater autonomy, allowing buyers and sellers to directly to each other, store value and conduct transactions without the need to go through central banks and other governmental third parties. But for inexperienced investors, decentralised exchanges may pose greater risks, as the functionality of these exchanges are still basic and low trading volume leading to lower liquidity.
However, for crypto to fulfil its potential as an institutional asset, these investors require a centralised infrastructure, one that reflects the traditional financial system. To capture the potentially uncapped upside of early crypto adoption, before institutional money enters, finding funds with the maximum level of security, liquidity and transparency is crucial.
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