Bitcoin and cryptocurrencies have attracted the attention of Wall Street in recent years, with some of the biggest bitcoin and crypto asset managers reporting massive inflows. The bitcoin price, after struggling through a prolonged so-called “crypto winter” in 2018, has found relative stability around the $10,000 level over the last 12 months.
Now, research from bitcoin, cryptocurrency and blockchain data company Chainalysis has revealed institutional investors on Wall Street are increasingly moving even larger transfers of bitcoin and cryptocurrency—with the trend “only just beginning.” “As of June, approximately 90% of North America’s cryptocurrency transfer volume came from professional-sized transfers, which we categorize as those above $10,000 worth of cryptocurrency,” the Chainalysis team wrote in a blog post detailing the findings of its 2020 geography of cryptocurrency report.
“However, over the last two years in North America, we’re seeing the impact of a growing class of institutional investors whose transfers account for the growing dominance of professionals in the North American market since December 2019.” Bitcoin and cryptocurrency transfers in North America above $1 million rose from 46% of the total value transferred in late 2019 to a high of 57% in May 2020, Chainalysis found. The overall professional market share of professional-sized bitcoin and crypto transfers in North America rose from 87% to 92% over the same period.
“In other words, the increasing dominance of North America’s professional market since December 2019 appears to be almost entirely driven by transfers of $1 million or more worth of cryptocurrency, many of which we believe are coming from institutional investors,” the researchers wrote.
Meanwhile, despite the likes of multi-billion dollar bitcoin and crypto-asset manager Grayscale declaring institutional investors “have now arrived” in the crypto market, the trend could be just getting started.
“Institutional money is only just beginning to enter the cryptocurrency ecosystem, and so the market is still relatively immature and fragmented,” Kim Grauer, Chainalysis’ Senior Economist, said via email, pointing to exchanges listing different prices and exchanges being able to handle different amounts of liquidity for big buyers resulting in “liquidity constraints contributing to a higher potential for price volatility and market manipulation.” However, Wall Street’s increasing involvement in the bitcoin and cryptocurrency market “will help cryptocurrency mature in terms of greater transparency and price stability,” according to Grauer.
“We anticipate arbitrage opportunities closing up, better solutions for combining liquidity across exchanges, and greater price stability and price discovery,” Grauer said, adding: “We expect that as regulators and financial institutions better understand the benefits of cryptocurrency’s transparency, they will start to trust the space more.”