Paul Chou, a former Goldman Sachs executive and the founder of LedgerX, a regulated bitcoin derivatives and futures market based in the US, said that Bitcoin has been seeing unprecedented institutional interest for the first time in its history.
During an interview with Nathaniel Popper of the New York Times, Chou stated that despite the recent market correction that led the values of most major cryptocurrencies such as Bitcoin and Ethereum to drop by large margins, the demand from institutional investors and retail traders has been on the rise.
The industry is seeing unprecedented institutional interest for the first time in Bitcoin’s history. I’ve been amazed that the strongest believers in cryptocurrency often start out the most skeptical. It’s a healthy skepticism. But at some point the perception shifts, and for many institutions — I think we’re finally there.
Over the past five months, institutional investors such as the Rothschild family, Rockefeller’s venture capital firm Venrock, and George Soros have announced that they either have invested or plan to allocate large sums of funds to the cryptocurrency market.
Earlier this month, several reports revealed that a Chinese angel investor had purchased a total of 10,000 Bitcoins in the first quarter of 2018, which was when the Bitcoin price hit a yearly low of $6,000. Cai Wensheng, the founder of Chinese social media app Meitu with a personal net worth of $1.5 billion, told technology entrepreneur Wang Feng in an interview that he’d also invested in various Ethereum-based tokens such as Ontology, Theta Network, Zipper, ArcBlock, and Dxchain.
Institutional demand for Bitcoin and other cryptocurrencies in the West has been non-existent, in spite of anticipation from cryptocurrency investors of the entrance of retail investors into the cryptocurrency space.
But, as Chou noted, institutional investors have at last begun to invest in the cryptocurrency market, possibly because the market has declined substantially since its market cap peaked at nearly $900 billion.
In the future, Chou explained, more financial institutions will start to deal with cryptocurrency investors and holders directly, avoiding brokers and third-party service providers that could take big cuts of transactions.
ICE, the parent company of the New York Stock Exchange (NYSE), has already started to test a Bitcoin exchange it has developed and plans to launch it commercially in the short term. Unlike Goldman Sachs and Morgan Stanley, ICE has created a proper Bitcoin exchange that allows investors to buy, hold, and sell the dominant cryptocurrency without derivatives or futures contracts.
“The reason we got into crypto was not to partner with a bank, but to replace them. We deal with crypto holders directly in a way that really takes advantage of Bitcoin’s strengths, while avoiding brokers, banks and other institutions that take multiple cuts of the transaction,” Chou added.
The short-term trend of the cryptocurrency market is difficult to predict due to its high volatility. Analysts and investors unanimously agree that once institutional money flows into the market, it will gain stability as it experiences a new rally with billions of dollars in new capital.