Who Has the Power, Retail or Institutional Investors?

As first reported by CoinDesk, “There’s a scene in Pixar’s ‘A Bug’s Life’ (a very underrated movie) where Hopper (the evil grasshopper) clocks his whiny brother with a seed. And then another. Neither really hurt, obviously. He then opens the valve to the large seed granary, and ouch.

“The point Hopper was successfully making was that size and might do not necessarily equal power. That lies with the seeds, I mean the masses. Volume trumps influence.

“We hear so much about ‘institutional influence’ in the crypto markets that it’s easy to fall into the trap of thinking that institutions alone will decide when the next bull run will start. The ‘wall of institutional money’ that most of us were breathlessly expecting in early 2018 was supposed to push the price of bitcoin and other assets ‘to the moon,’ and savvy retail investors would tag along for the joyous ride (in a lambo).

“A year later, we no longer talk about the ‘wall,’ instead we are focusing on the infrastructure building and waiting for large incumbents to loudly declare their allegiance. Now we’re repeatedly told that ‘when Goldman/State Street/BNY start offering crypto services,’ institutions will pile in.

“A year later, we’re still missing the point.

“Bridging the gap

“Here’s the thing: ‘institutions’ are not stand-alone entities that operate in a separate microcosm from the rest of the economy. Most hold retail money: the vast majority of institutional assets under management are held by pension funds, mutual funds and insurance companies. They are not going to make investment decisions without some assurance that their clients will be ok with this.

There are exceptions, true. Hedge funds, family offices and endowments cater to different constituencies. They can take more risk, often have a more innovative base and aren’t subject to the same rules and restrictions. But – sizeable as they may be – they are a small percentage of global wealth.

“And they are, to varying degrees, already investing in cryptoassets. A survey earlier this month by Fidelity Investments and Greenwich Associates showed that over 20% of institutional investors already have some exposure. Another survey published last month by Global Custodian and BitGo revealed that 94% of endowments had already invested in the asset class. Grayscale Investment’s Q1 report released a couple of weeks ago showed a strong increase in family office participation.

“The vast bulk of institutional money, however, is still waiting, and it’s not for an announcement from Goldman Sachs or its peers (although that wouldn’t hurt sector confidence). It’s not for a more comprehensive build-out of market infrastructure (although that is helping). It’s not even for regulatory clarity (although that would also be very good news).

“It’s for mainstream retail interest to kick into gear.”

Continue to read the full report at CoinDesk.

Track the current price of Bitcoin, Ethereum, Ripple and altcoins here.