Interest in cryptocurrency has relatively risen amongst the institutions. Many cryptocurrency trading platforms have recorded an increasing number of institutional crypto traders. With Huobi exchange gaining about 40 percent institutional trading on its Futures market, the exchange recently shared its opinion on what is driving up institutional attention.
Crypto platform sees an influx of institutions
So far, this year has ushered in more interest in digital currency investment. Despite the coronavirus pandemic, which drastically affected the crypto market, including the traditional asset market, institutional crypto traders have been increasing gradually. More so, the many regulations brought more light to the emerging space.
The most notable incident occurred with Grayscale Bitcoin Trust, an investment vehicle that allows investors to gain exposure to Bitcoin’s price movements in the form of traditional security. The institutional platform had recently accumulated a large amount of Bitcoin mined since the halving.
Huobi’s take on a growing number of institutional crypto traders
At first, the Vice President of Huobi Global Markets, Ciara Sun, stated that the price volatility of digital currencies and their liquidity is one factor attracting the attention of traditional and institutional crypto investors. The ability to meet the demands in volatility and liquidity makes the digital currency unique, according to Sun.
“For example, traditional investments like real estate have price volatilities but lack of liquidity. Foreign exchange markets have high liquidity but lack price volatility. Investors see arbitrage opportunities in crypto as an emerging market. An above average range annual return can be seen as good performance in the traditional market, but is actually a quite mediocre return in the crypto derivative market.”
Does volatility matter?
While volatility might sound attractive to institutional crypto traders, it is indeed a double-edged sword. Hence, experienced traders are most likely to benefit from it the most. Moving forward, Sun emphasized that digital currencies possibly serve as another way to hedge against government interventions that can potentially result in inflation.
Thus, institutional investors are making their way into cryptocurrencies to avoid the government, per se. Reportedly, traditional assets are sometimes influenced by monetary policies. Upon more money printing, these investors perceive that “digital assets can be one way to hedge against inflation.”