Institutional Crypto Trading: Problems And Solutions
There have been many discussions about cryptocurrency volatility, especially after several of Bitcoin’s ups and downs. That was the reason why institutions did not take the crypto industry seriously until recently.
In the 2020s, major institutional players started to invest in Bitcoin, pushing the crypto industry towards mass adoption. On the one hand, crypto institutional trading has brought new trends of participating in new markets and using innovative technologies. On the other hand, it created the need for institutional services, regulations, custody, and tools to manage risks.
The Role of Institutional Crypto Platform
Institutional-grade exchanges such as WhiteBIT, Coinbase, or any other institutional crypto trading platform felt the trend and made an accent on developing infrastructure for institutional clients:
- Custodian solutions
- Reporting tools
- Market data updates
- Algorithmic trading
- Compliance with regulations
- Market-making program
- Access to advanced tools
- etc.
However, despite such tech giants as MicroStrategy and banks like JPMorgan Chase pouring billions into crypto, many institutions still stay on the sideline. Why does it happen so?
What Prevents Mass Institutional Crypto Adoption
First and foremost, the lack of clear regulations keeps companies from dealing with crypto. This sector used to be perceived as the “Wild West”, with no rules. However, over time, active industry participants and state bodies started to bring order to it. For example, the self-regulatory Virtual Commodities Association launched by the Winklevoss twins means cooperation of several major crypto platforms and improved internal control.
Another example is the emergence of legit crypto exchanges that have licenses and regularly undergo audits. An institutional cryptocurrency platform must comply with the existing regulations. Only in this case, it can provide a trusted and safe environment for traders.
Another big concern for investors is custody. Until recently, there were not much of reliable solutions for crypto holders, or they had to rely on questionable and not entirely transparent services. Today many banks stepped into the crypto sector. In addition, trading platforms offer reliable custodian solutions. The more reliable solutions emerge the more institutions change their minds about crypto investments.
Liquidity used to be another concern for investors. However, this problem is efficiently solved by major trading exchanges. Cooperating with high-frequency traders, professional market makers, and institutional players, platforms maintain sufficient liquidity for their markets.
Final Thoughts
As institutions are willing to participate in the crypto sector, but still keeping back because of some concerns, the industry will do its best to solve them all. The influx of institutions to the space will contribute to market stabilization, bringing a clear regulatory framework, stable liquidity, and reliable custody solutions. As soon as these concerns are resolved, the crypto industry will receive mass adoption.
