The year 2022 appeared to be a disaster for the cryptocurrency market as well as for most retail traders engaged in it. In May 2022, the market experienced a collapse, caused by many reasons (one of them was the crash of the Terra project). Between November 2021 and July 2022, the value of cryptocurrency dropped from $3 trillion to $1.3 trillion, the global crypto industry lost 70 percent of its value.
The crypto collapse frightened many retail traders, who rushed to withdraw from the market, still suffering losses. On the flip side, this situation forced regulations to take a closer look at the crypto industry. This, in turn, creates a more trusted and credible environment for those institutions that used to stay aside of the crypto industry. So despite the crypto collapse and following the “crypto winter”, institutional interest in crypto has increased.
In this article, we will discuss:
- What companies may participate in crypto institutional trading?
- What advantages do institutions get when tapping into crypto trading?
- Negatives of institutional investments.
Who are Institutional Investors Cryptocurrency?
Those are hedge funds that act on behalf of their clients, such as pension funds or investment funds, and utilize hending strategies in crypto investments. Institutions are also pension fund managers that manage their clients’ pension contributions to gain additional profit. Institutions are investment banks that sometimes act as brokers or add crypto trading desks for their clients. Institutions are also family firms, tech companies, and other businesses that can pour large trading volumes into the crypto market. However, it’s not that easy to become an institutional investor – before partnering with a crypto trading exchange or a market maker trading platform, entities must prove they have sufficient capital and comply with regulations – some crypto companies impose a trading volume threshold to potential investors.
Institutional Crypto: Pros and Cons
Below, you can see a table with positive and negative aspects an institution may encounter:
| Pros | Cons |
| A large amount of capital leads to large returns in crypto rise | Tight regulations |
| A large capital means larger diversification | The higher the capital, the higher the risks |
| Lower trading fees, flexible commissions | Fewer crypto assets are available, compared with retail traders. |
| Direct access to markets and financial portals | |
| Access to advanced tools and technologies | |
| Better conditions for leveraged trading |
Table: Advantages and disadvantages for institution.
Conclusion
The crypto industry suffered a great collapse in early 2022, but it did not deter institutional players. On the contrary, they started their active participation in the market. Institutional in crypto are hedge funds, tech companies, investment companies, pension funds, and family firms. With crypto increasing, institutional adoption is going to grow in the future.
