Bounty of Institutional Clients Lined-up for OTC Cryptocurrencies

Despite the crypto market downturn (especially in 2018) which began after the news of the US Securities and Exchange Commission’s (SEC) delayed decision on an ETF product approval, institutional clients’ interests are intensified as the bitcoin has been sensing a lot of developmental activities also on the other hand. 

During late 2017, bull-run was surging to the all-time highs, that led the crypto-space value sours from $20 billion to $800 billion, that was when institutional players, like hedge funds, asset management companies and endowments, seemed manifestly reluctant to test their luck in this industry. But for now, institutions collectively have been showing keenness in crypto wholesome, as we understand from an analysis by Morgan Stanley.

It is reiterated that the BTC ETFs would be the significant aspect that most likely to herald the inflow of institutional funds into crypto-avenues. While there may be abundant BTC to invest in.

For Bitcoin, the institutional money inflow in a fully legalized asset like an ETF would be an indication of authenticity. Some traditional finance firms have made forays into Bitcoin, but those were mostly small-scale test investments.

Kara Stein, the Commissioner of US SEC, recently sent the guidelines as to how the regulator is considering steps to oversee developments in the cryptocurrency industry, citing the establishment of the Strategic Hub for Innovation and FinTech space.

Amid these developments, institutional clients appear to be disregarding momentary obstacle and are choosing over-the-counter (OTC) markets instead of exchanges to enter the bitcoin space, as per the Forbesreport.

OTC could be handy for institutions for ease of doing crypto business: Since the supply of bitcoin is comparatively limited, and is open for trade at many exchanges but with some liquidity and regulatory hiccups, these exists the essentialities of some ideal players to be listed on OTC markets.

An investor who’s keen on investing a multi-million-dollars worth of investments into crypto avenue cannot afford to just sign up at a random exchange and do it. They may encounter the glitches in the IT infrastructure, liquidity, and regulatory obstacles with cryptocurrency exchanges to execute large bulk orders. Just for instance, some ABC exchange can enable its clients to trade with limit orders (per say, max worth $15k cryptocurrency) per day.

Such limits are standard all across the formal exchanges. While Kraken, the leading US-based exchange allows withdrawals $2.5k per day and $20k a month. 

Another renowned exchange, Binance is exclusively crypto-to-crypto trading platform. Hence, their liquidity options come in the form of stablecoins, which again is a risky alternative to institutional traders.

Monica Summerville, the director of fintech research at UK-based Tabb Group, interviewed with Forbes, states that“the big deals have to go OTC. A lot of the exchanges limit the order size, so you have to break up your orders, and that’s just fatal”.

The OTC market volume has surpassed $12 billion globally and it is two-to-three times larger than that of standard crypto exchanges, she mentions in a report. 

Boston-based Circle validated a common stance hovering around OTC constructive sentiment, with CEO Jeremy Allaire stating Bloomberg that Circle Invest has seen “triple-digit growth” in the number of individuals enrolling into its OTC business.

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