Institutional Investors Flock Back to the Crypto Market

The cryptocurrency market has suffered a triple drop in its capitalization, notable bankruptcies, the arrest of Sam Bankman-Fried, and a crypto winter. These events could potentially help banks and investment funds to firmly establish themselves in the crypto market.

The White House has also released a roadmap for cryptocurrency regulation. They have emphasized that “in the past year, traditional financial institutions’ limited exposure to cryptocurrencies has prevented turmoil in cryptocurrencies from infecting the broader financial system. It would be a grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.” 

Moreover, the White House has cautioned traditional financial institutions, including pension funds, against diving headfirst into cryptocurrency markets. Despite reports of institutional investors losing interest in crypto investments during the bear market of 2022, it seems that the Biden administration has different information.

Recently, one of the world's largest banks, J.P. Morgan, released its latest e-Trading Edit (e-trading is a method of trading stocks, currencies, etc. through electronic stock markets such as NASDAQ). The media has been quick to jump on a recent report that some are claiming is evidence that “crypto is now toxic on Wall Street and an overwhelming majority of traders refuse to touch it this year.” But a closer look at the report, published by J.P. Morgan, reveals some interesting findings. According to the report, 28% of the 834 institutional traders surveyed either currently trade cryptocurrency or plan to start doing so within the next 1-5 years. While this doesn't necessarily mean they're pledging their loyalty to Bitcoin, it does suggest that fears of being "poisoned" by crypto assets may be overblown. What's more, the report found that 100% of those surveyed plan to increase their e-trading activity in 2023. Electronic trading of cryptocurrencies and digital coins is predicted to outpace commodity and credit spread trading in terms of growth this year.

It's worth noting that the CEO of J.P. Morgan is known for being skeptical about cryptocurrencies. However, despite this, the bank has its own token called JPM Coin, as well as a platform for tokenizing traditional assets. Onyx, a JPM business unit, is currently developing a blockchain-based banking app called Liink. This brings to mind the recent advice from the organizers of the Eastern Economic Forum to keep a close eye on what major banks and established players in the global financial market are doing, rather than just what they are saying.

Sources have recently reported to Bloomberg that institutional interest in cryptocurrencies remains high, with bankers and investment companies promoting blockchain projects, tokenization, and solutions related to currency storage.

BlackRock, an investment firm that manages the world's largest portfolio of assets, is now showing interest in stablecoins, blockchain, tokenization, and cryptocurrencies, according to insider information. In 2022, the investment firm partnered up with Coinbase to make it easier for BlackRock's clients to trade and manage digital currencies.

Another example is Goldman Sachs Group, one of the largest investment banks in the world, which introduced its own digital asset platform last fall. Goldman Sachs also participated in the issuance of the European Investment Bank's digital bond, which was created using blockchain technology. 

In addition, Goldman offers cash-settled crypto derivatives to its clients. Investment funds and traders can buy and sell cryptocurrency futures, non-deliverable forwards, and options that pay out in cash.