The US launch of derivative products such as Bitcoin spot ETFs could finally allow institutions to invest directly in a derivative representing 100% BTC.
Institutional investors were one of the drivers of crypto markets during the last big bull run, and they could be even more so in 2024.
Institutional investors are understood to be all large professional investors who do not belong to the category of retail investors. Specifically, retail investors are private citizens who invest on their own behalf, while institutional investors are companies or organizations that generally invest on behalf of others.
Among the largest institutional investors are pension funds, banks, mutual funds, hedge funds and insurance companies.
From this definition it also follows that institutional investors are investors who invest large amounts of capital, while in most cases retail investors invest small amounts.
The Last Bull Run
The first derivative products that allowed positions to be taken on the price of cryptocurrencies on traditional stock exchanges were the futures launched in December 2017 on CME and Cboe.
However, these derivatives failed to attract large capital. At that time, i.e. in 2018 and 2019, institutional investors were still not very familiar with the cryptocurrency markets and, despite having derivative products available on the exchanges where they were already widely traded (in particular, the CME of Chicago), were not very attracted to these new digital assets.
The turning point occurred in 2020, both because the response of Bitcoin and cryptocurrencies to the collapse of the financial markets in March was excellent, and because the third BTC halving occurred in May. However, the presence of institutional investors in crypto markets, or in the crypto derivatives market, was not massive in 2020.
This was only a first entry which probably allowed the start of a new great bullish streak at the end of the year, after those of 2013 and 2017. The 2021 bull run, though, was characterized by relatively smaller increases in the price of Bitcoin and much larger increases in the percentage of memecoins and smaller altcoins.
Since institutional investors are not interested in smaller assets with limited trading volumes, the success of memecoins and shitcoins in 2021 was largely due solely to retail investors.
2024: The Year of Institutional Investors in the Crypto World?
The US launch of derivative products such as Bitcoin Spot ETFs could finally allow institutions to invest directly in a derivative representing 100% BTC.
The Bitcoin ETFs already present in the US market are not investment instruments. Instead, the new ETFs launching in January will be collateralized in BTC and will perfectly represent Bitcoin on traditional exchanges.
Bitcoin’s landing on the Nasdaq, albeit through a derivative, should allow institutional investors to invest in BTC almost like buying tokens directly in the crypto spot markets, but without the issues related to custody and on the platforms that they already use.
Predicted Impact of Institutional Investors on the Crypto Market in 2024
According to several crypto analysts, institutional investors in 2024 will end up becoming more and more actively interested in the cryptocurrency market. As revealed by Deribit’s commercial director, Luuk Strijers, data from its platform for the exchange of crypto derivatives would show an increase in the activity of institutional investors starting in October.
The revival of crypto markets this year, combined with growing optimism over the approval of ETFs, has also attracted the interest of institutional investors, who are already preparing for greater participation in this market in 2024.
By Audy Castaneda
