Institutional participation in the cryptocurrency landscape is growing particularly rapidly. Such tech giants as MicroStrategy and Tesla have been pioneering the institutional adoption of crypto. Banks and financial entities don’t miss the opportunity to tap into this evolving sector, for as more their clients realize the benefits of digital assets, the more they require crypto integration into banking systems.
The first thing that differentiates institutions from individual traders is the investment size - companies operate large sums, often billions of dollars. It impacts institutions' strategies and risk management, as well as sets robust custody requirements.
Institutions use sophisticated analytics-driven trading strategies and need quality tools for analysis, available on institutional crypto exchanges.
The required institutional services include clear governance, compliance with regulations, and custody - companies are always under scrutiny to adhere to laws.
Many companies just buy and hold crypto, but some are actively engaged in institutional crypto trading by buying and selling digital assets in large amounts. It takes place on an institutional crypto exchange. Examples may be Binance, WhiteBIT, Coinbase, and KuCoin. Active traders may also participate in market-making by partnering with a platform. A crypto market-making company’s task is to place buy and sell orders to trading pairs, thus, maintaining the required level of liquidity. So when other investors and traders who use the same platform place an order to buy (sell) a token (in any amount), this order will be fulfilled.
Other ways for crypto institutional investors to participate in the market include:
The crypto market is still young, so it is subject to manipulations and wash trading, which means instability. Another reason is the lack of regulatory or insufficient clarity in this matter. However, by choosing reputable trading platforms like those listed in this article, investors protect their funds with KYC and AML mechanisms.
The pseudonymous nature of institutional crypto trading does not allow investors to know who is there on the other side of the deal, and it also creates a problem.
Despite some factors still holding institutions back, they are going to be resolved with the development and maturation of the crypto trading infrastructure. In addition, regulations on crypto are catching up - the MiCA regulatory framework launched in the EU is the best proof of this.