Crypto Institutional Investors: What They Buy and How They Are Different from Retail Traders Image

Crypto Institutional Investors: What They Buy and How They Are Different from Retail Traders

By Film Threat Staff | January 16, 2024

The cryptocurrency industry ceased to be an exceptionally retail trader’s space long ago – starting in 2018 and continuing in 2021, companies (especially in technologies and finance) started to actively participate in the crypto market. For example, such giants as MicroStrategy, Tesla, Galaxy Digital companies, and banks such as Goldman Sachs and JPMorgan Chase were the first world-known entities to tap into crypto. 

In this article, we will talk about what institutions buy and how institutional trading of crypto differentiates from retail trading.

What Crypto Are Institutions Buying?

Usually, institutions participate in the crypto market through crypto exchanges such as Binance, Kraken, WhiteBIT, etc. An important note is that a platform must comply with regulations and ensure a decent level of protection for its clients. 

Also, investors can buy crypto through hedge funds, that invest in cryptocurrencies on behalf of their customers. Bitcoin and Ethereum still remain the most popular assets for institutions, with the most common strategy of long-term holding. Other ways for institutions to use crypto include:

– Investing in gambling projects like AltGambler

– Trading and market-making

– Creating new products

– Tokenization of assets

– Participating in ICOs and diversifying portfolios with new tokens

– Using crypto for cross-border payments.

Interestingly, today more than 50% of asset and wealth managers consider having digital assets in their portfolios.

Key Features of Institutional Crypto Investors

Let’s consider some of the key features of institutions in crypto:

– Institutions often use their clients’ funds for investments, while retail investors always use their own money. Therefore, institutions risk their clients’ money, which requires a higher level of security and protection against hacker attacks and other risks. 

– Institutions tend to invest and hold assets in the long run, while retail traders are more active in daily trading.

– Institutions often buy crypto during market downturns, which proves their belief in future growth. Retail traders are more prone to emotional decisions and selling out crypto during downtrends.

– Institutions are under scrutiny from the part of regulatory bodies and they have to report on their finances, so they need to navigate those regulations and comply with them. This usually includes AML and KYC requirements, and adhering to specific rules set by regulatory bodies in their jurisdiction. Retail traders are not subject to regulations to that extent.

Final Word

The crypto landscape has shifted from retail to institutional dominance, with companies like MicroStrategy and banks such as Goldman Sachs active involvement. Unlike retail traders, institutional crypto investors often use client funds, prioritize long-term holding, exhibit confidence during market downturns, and navigate regulatory scrutiny with compliance obligations. 

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