Institutional Trading and Cryptocurrency Industry


A growing number of indicators suggest that institutional players are continuing to enter the digital asset markets, which have been dominated to date by high-net-worth individuals and actively trading crypto enthusiasts. Case in point: Crypto markets are seeing all-time highs in futures contracts’ open interest at entities such as the Chicago Mercantile Exchange. Widely known as one of the world’s largest financial derivatives exchanges, the CME enables sophisticated traders to trade in asset classes such as agricultural products, energy, metals and crypto futures and options.

Traders on the CME are generally institutions, not individuals, which is why this open interest in the digital asset market is noteworthy. Institutions that are already onboarded and active on the CME — trading wheat and oil for example — are increasingly moving into crypto futures as an alternative asset class. In fact, derivatives volume increased to an all-time high in May, totaling $602 billion while total spot volumes increased 5% to $1.27 trillion. As a result, derivatives represented 32% of the digital asset market in May, compared with 27% in April, according to CryptoCompare’s most recent Crypto Exchange Review.

Other credible indicators include the latest report from Fidelity Digital Assets, a subsidiary of the $7.9 trillion asset manager. The survey found that of the nearly 800 institutional investors surveyed, almost 80% find something appealing about digital assets. Respondents ranked three characteristics of digital assets as almost equally compelling, that they: are uncorrelated to other asset classes (36%), offer an innovative technology play (34%) and offer a high potential upside (33%).  

But what’s far more eye-catching is the fact that six out of 10 respondents believe digital assets have a place in their investment portfolio — and this survey was done prior to the recent COVID-19 pandemic. If the survey were taken today, it would be interesting to see where the numbers would fall given widespread discussion that the global crisis could be a tipping point for the mass adoption of digital assets. 

For instance, macro investor Paul Tudor Jones recently publicized his investment in Bitcoin (BTC) and credited the pandemic with substantially altering his interest in digital assets. His thesis is that quantitative easing will lead to inflation and he views Bitcoin as one of the best inflation hedges.

Support for crypto assets at this level instills confidence in the asset class a whole. The proof is in the numbers and the numbers reveal that crypto assets are becoming increasingly popular with institutional investors.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Kristin Boggiano is president and co-founder at CrossTower. Kristin is a structured products, regulatory and digital asset expert who brings over 20 years of experience as a trading and regulatory lawyer and over 9 years in digital asset trading and regulation. Prior to founding CrossTower, Boggiano was a chief legal officer of AlphaPoint, managing director of an algorithmic trading platform at Guggenheim, and special counsel at Schulte Roth, where she founded the structured products and derivatives division and led the regulatory group for Dodd Frank. Kristin is also the founder of Digital Asset Legal Alliance and Women in Derivatives. She earned her law degree and MBA from Northeastern University and her B.A. from Sarah Lawrence College.