on the crypto
Institutional investors have increased their cryptocurrency allocations over the course of the crypto winter, according to a recent report released by Coinbase.
Innovation is the most important thing for institutional investors
According to the report, one of the main aspects mentioned by institutional investors when looking for new areas of the crypto space on which invest it was innovation.
All kinds of innovations are happening in the cryptocurrency space right now, from better bridging infrastructure to oracles and scaling solutions, and these are the things that institutions are most interested in.
Despite the volatility, cryptocurrencies are seen as having the best risk/reward ratio
Volatility has been a feature of the cryptocurrency markets since the very beginning, with the price of Bitcoin undergoing huge variations.
The cryptocurrency markets are easily the most volatile one can participate in, and many market participants can easily lose a lot of their money.
Nonetheless, institutions continue to view cryptocurrencies as the best risk/reward opportunity in the entire industry and where the greatest returns can be made if you are a responsible investor.
Regulatory compliance is the most important factor in choosing partners
The main factor that emerged when institutions were asked what sparked their interest was that the companies they would invest in and collaborate with were fully compliant and met all regulatory requirements.
This should come as no surprise, as large financial institutions have always been concerned about this aspect, especially in a nascent sector such as cryptocurrencies.
However, this trend will become even more prominent in the future, especially in light of the recent FTX debacle, where a number of large institutions were burned because they believed they were working with a compliant company.
Even Kevin O'Leary, who always rails against the importance of regulation, was surprised to discover that FTX was not as compliant as he was led to believe, by virtue of being headquartered in the Bahamas.
Constant accumulation
However, it's worth noting that lenders aren't too optimistic about the price of cryptocurrencies in the short to medium term: most respondents believe prices are likely to trade within a range over the next few months.
This doesn't mean that institutions aren't investing – they are – but that they are taking a consistent approach to accumulation and are doing so at strategic moments. And what do you think of the Coinbase report? Do you think this winter will pass soon? We have no doubts about it. And as someone once said, cryptocurrencies are here to stay!
