I was at an event in NYC for the launch of a new cryptocurrency trading platform last week. The question that consistently came up was “How do we acquire the next 100 million investors in the space?”. I think this ultimately can be boiled down to “When will the crypto market cap go back up again?” or simply “When moon?”.
This has been a question on a lot of people’s minds. Most point to more fiat-crypto trading pairs and institutional money flowing into crypto as the price point savior. We’ve taken a step in the right direction as it concerns the latter with Coinbase opening up its custodial platform for the first time last week.
Custody – The Major Road Block To Institutional Investment
Custody is important to asset managers and the like. Crypto is a dangerous world to operate in at the moment and asset managers need to ensure that the assets they hold remain where they are supposed to. A fund manager can’t turnaround to their investors and tell them all their private keys are missing and they are out of luck.
So now that the financial infrastructure exists will institutional investors flood the markets like everyone believes? I’m not quite sold. For one this is only one platform and large scale firms won’t be the first to test the waters. It will take more that institutional money investing in cryptocurrency to get the crypto market cap back close to one trillion dollars.
What Will Really Send The Crypto Market Cap Higher?
What we’re forgetting here is that cryptocurrency as a whole has not proven any utility value besides being a speculative asset (at this point). Can we really expect that these investment managers, who have a fiscal responsibility to care for their client’s money, to dump a ton of capital into speculative assets of this nature? It would be silly to assume so.
So when will asset managers feel comfortable enough to allocate a certain amount of their portfolios to crypto? In my opinion until cryptocurrencies (or at least certain cryptocurrencies) prove their utility value asset managers won’t drive this market up.
This will be a slow climb. Cryptocurrencies are not mature enough as platforms to scale, as we saw with Bitcoin at the end of last year. High network traffic burdened the platform with large transaction fees and slow transaction times. And this is the oldest and most mature platform out there.
Similar to companies that came out of the dot com bubble of the late ’90s these projects need time to grow and find their niche. Google and Amazon, two of the largest companies today, survived that bubble but it wasn’t until years later that they found their stride. Investors need to think long-term when investing in the crypto markets – the next run up to the moon might take longer to come around than you think. But I’m sure that when that happens the crypto market cap will exceed the all time highs that we have seen.