Institutional Investors: Avoiding, Causing, or Reveling in the Bear Market? Depends Who You Ask
December 21, 2018 by Paul de Havilland
The sustained crypto bear market of 2018 is deterring institutional investors from crypto, according to Bloomberg. For others, it is attracting them. Still others see Wall Street dumping crypto because of the bear market, while spooked retail speculators also flee. Who’s right?
Also see: In Shift from White Paper, Substratum to Begin Trading ICO Treasury
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JPMorgan Analysts Reporting What They Want You to Think
No storied Wall Street analyst makes findings they don’t want you to believe–and that’s usually because they plan to make a bet in the opposite direction.
Many millionaires have made their fortunes betting against investment bank predictions, understanding that aligning positions with serious institutional money means believing they release analyses based purely on what they would like to see happen, in order to then take advantage of the fire sales their reporting tends to create.
Notwithstanding the very recent surge in crypto prices over the past 24 hours, according to reporting by Bloomberg, JPMorgan Chase & Co analysts wrote in a December 14th research paper:
“Participation by financial institutions in Bitcoin trading appears to be fading… Key flow metrics have downshifted dramatically.”
Those flow metrics include those in Cboe and CME futures markets and average trading volumes (although they report CME activity has been steady, while Cboe activity has faded). The influx of institutional money that bleeding retail crypto hodlers have been waiting for is not coming because of contracting market conditions.
OTC Market Activity Observers Beg to Differ
TABB Group published a report last month that the recent posturing to institutional investors with over-the-counter trading markets by the likes of Coinbase and Poloniex is because OTC trading is growing… fast.
The activity in OTC markets, according to TABB analyst Monica Summerville:
“… is coming from traditional buy-side players, specifically hedge funds, proprietary trading firms, pension funds and sovereign wealth funds, as well as private wealth, miners and early bitcoin adopters.”
As reported by Bitsonline on November 29th, over-the-counter crypto trading is triple the volume of trading on exchanges:
Just read an estimate from the TABB Group (in a $5000 report) that OTC crypto markets exceed exchange volumes by 2-3x. That would mean 1-1.5MM BTC is traded OTC *daily*. Strange it’s not visible on the blockchain, which shows a meager 100k/day.
Source: https://t.co/5AxY82DM38 pic.twitter.com/pJrDoazqdk
— Eric Wall (@ercwl) July 29, 2018
The appeal for institutional investors in OTC markets is the ability to trade discretely and without moving the market.
Meltem Demirors Sees an Institutional Exodus Causing Bearish Movements
Meanwhile, others like Meltem Demirors of CoinShares told CNBC’s Fast Money that the dramatic plunge in November, after a relatively smooth few months of sideways price action, was actually caused by an institutional exodus:
“My view is probably some institutions and funds deleveraging, taking money off the table.”
Crytpo’s market crash could be the beginning of something bigger. @Melt_Dem says #crypto is in a financial crisis. pic.twitter.com/xBjikNwfth
— CNBC’s Fast Money (@CNBCFastMoney) November 14, 2018
So Where Are We At?
One view sees institutional money avoiding the crypto market because of the bear market, another sees a surge in institutional investment coinciding with–and possibly seeking and helping cause–the bear market, and a third reckons plunging crypto prices are being caused by the exit of big money players.
The three views are mutually incompatible and the JPMorgan assessment may not reflect what the Wall Street titan actually believes. Where the truth lies is likely somewhere in the middle.
Sound off below. Are big money investors causing the bear market, enjoying it, or avoiding it?
Images via Pixabay
