Institutional Involvement Can Move Crypto Even More Easily Now

February 13, 2022 8:09 pm

If it feels like the crypto market right now is quiet, it may actually be true as trading volumes right now are only about 33% of what it was when measured during February of last year.

What this means is that it only takes a smaller amount of capital to move the prices one a single direction and many investors are speculating that this may be the calm before the storm.

Once institutions that have already announced their involvement in the space step in, the market may decide to rapidly resume a course that was experienced back in 2021.

CoinDesk reports:

Layer 1s may be the talk of the town these days, but trading volumes on exchanges haven’t kept up with skyrocketing market caps.

A year ago, February daily volumes versus value in BNB, cardano, solana and avalanche averaged 22%, 25%, 9% and 17%, respectively. Over the past 30 days, it’s been 2%, 5%, 6% and 4%.

Thinner markets, of course, mean that it doesn’t take as much to move prices as it once did.

For an example, look no further than a week ago, Saturday, Feb. 5, when bitcoin finally broke above $40,000 and stayed there for the first time in over a week.

Volumes the previous day were $16 billion, and on Saturday they were $25 billion. Again, these figures are low even by recent standards, but they serve as a reminder that it doesn’t take much to move a market.

That may be something to think about should we see large institutional entrants anytime soon.

The same trend could also be observed on decentralized exchanges which have been increasingly popular these days when compared to traditional centralized crypto exchanges.

So far, decentralized exchange volumes amounted to around $60 billion for the month of February while it was north of $100 billion back in January.

Of course, the thinner markets may not mean anything for investors or holders as history has shown that a period of thin markets have often been followed by a sudden emergence of volume once institutions decide to move the market again.

For example, Blackrock has recently revealed that they will be entering the crypto market soon for their clients which signals a big shift as the company currently manages over $10 trillion in assets.

CoinDesk reports:

The New York-based company, which manages over $10 trillion in assets for institutions, plans to enter the cryptocurrency space with “client support trading and then with their own credit facility,” one of the people said.

In other words, clients would be able to borrow from BlackRock by pledging crypto assets as collateral.

One of the people said BlackRock will allow its clients – which include public pension schemes, endowments and sovereign wealth funds – to trade cryptocurrency through Aladdin (short for “Asset, Liability, Debt and Derivative Investment Network”), the asset manager’s integrated investment management platform. The timetable for unveiling the service is unclear.

BlackRock declined to comment.

The asset manager may have been telegraphing its intentions as early as June when it began hiring for an Aladdin blockchain strategy lead.

These days it’s taken as known that Wall Street banks and large financial institutions are edging into crypto, with the likes of Goldman Sachs, Morgan Stanley and Citi carefully choosing strategies.

Whatever the case may be, 2022 is set to be an interesting year for crypto as the industry continues to expand and gain mainstream adoption while facing various regulatory and economic hurdles.

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