Institutional Investors In Crypto: The Good, the Bad, and the Ugly

in LeoFinance3 months ago

Fair is foul; foul is fair ─ Williams Shakespeare

At the moment, there appears to be a general consensus in the crypto market that the chariots of the present bull run is being driven by the involvement of institutional investors such as Grayscale, Micro Strategy, Paypal, etc. It is an open secret that these big players have been buying hefty bags of Bitcoin in the past few months. And in all fairness, their efforts have undoubtedly paid off and to the benefits of cryptozens.

From trading below $9,000 per coin on the day of the halving in May 2020, Bitcoin has gone on to smash its previous all-time high and set a new one at a stunning $42k per coin. Fascinatingly, institutional investors are not slowing down on their buying spree. In short, Grayscale reportedly bought a startling $600m worth of Bitcoin a few days ago, bringing its entire crypto holding to an estimated $24b.

The involvement of institutional investors in the cryptomania does not end with Bitcoin. There are wide spread reports that they are now flirting with Ethereum. Needless to mention, these new efforts have arguably pushed Ethereum to surpass its previous all-time high, although it is yet to do so decisively.

Nevertheless, there is no gainsaying the incontrovertible fact that the coming of institutional investors into crypto has brought the much needed validation and confidence that are needed by retail investors who have stayed on the sidelines for too long.

Also, the arrival of institutional investors reinforces the truth that cryptocurrencies have come to stay. These big players have very huge stake in government and can always use it to influence crypto-friendly policies. Of course, these are good news for cryptozens.

Like almost everything, the involvement of institutional investors in crypto also has its bad and ugly sides. And the starting point will be centralization. The whole essence of cryptocurrency is to achieve decentralization and freedom. Unfortunately, institutional investors pose a threat of centralization.

For instance, Grayscale alone holds and controls an estimated $24b in crypto assets. The combined wealth of these big players increases their influence and control in the market.

The second point draws largely from the first. The large holdings of these giant players can be used to manipulate the prices of digital assets, even the price of Bitcoin. Not too long ago, Grayscale liquidated its entire XRP holdings, an event which had a significant impact on the price of the asset alongside the entire altcoin market.

Now imagine what will happen if the same thing happens to their entire Bitcoin or Ethereum holdings. The resulting chaos will be disastrous, you can be sure.

I will conclude by saying that the presence of institutional investors, you can expect, will alter the organic arrival of the bear market. Be reminded that these are not retail investors whose market decisions are largely driven by greed and impulse, which will allow for a natural occurrence of the bear market.

Contrarily, institutional investors have their sell target set even before they purchased their first dollar worth of cryptos. The enigmatic question remains, what is the sell target of these big players who now have a choking grip on the market? Unfortunately, the answer to that question will determine the beginning of the next bear market. Can you still sleep with your two eyes closed?

Fair is foul; foul is fair ─ Williams Shakespeare

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"What?" is the question, indeed. But it seems relatively safe to assume that the "institutional investors" came into here not for extra 10-20% profits. I don't know what can satisfy their greed, but I believe it's somewhere in +5x-10x-20x numbers. Especially if they manage to corner BTC and to convince others about the "digital gold" story.
Besides, they can't dump their holdings right now. If Grayscale starts dumping their shitpile now, the price will quickly go back to $5K and all Grayscale's paper profits disappear. The guys need buyers, much moar big buyers!

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Greetings @gandhibaba

Things may not be as simple as we expect them to be, but what we should recognize as you indicate in your writing is that a kind of confidence has been generated in investors, and that is totally healthy, and it is something we have long wanted to generate confidence in order to move forward. I think we should be open, this decentralization thing is not an absolute truth, the only thing that is certain is that investors are needed, because it is the way to maintain these platforms over time.