Crypto Trading Firm Sees Incoming Influx of Institutional Investors
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With institutional adoption of cryptocurrencies always seen as a solid sign for the market, their re-entry into the crypto market is sure to bolster the prices of assets.
Big Money Enters the Market
Markus Thielen, the head of research and strategy at crypto investment and lending firm Matrixpint, explained that the market appears to be witnessing a significant surge in institutional investment. Thielen made this known in an interview with industry news sources, where he explained that despite what many believe, institutions have still not given up on crypto unjustly yet.
According to Thielen and Matrixport, it’s easy to distinguish whether an asset is seeing more adoption by retail or institutional investors based on its performance. If the coin trades well – both in terms of volume and price, during U.S. trading hours, there is a significant chance that institutions have flooded its market and are now speculating. However, assets with higher levels of retail interest tend to be more active during Asian trading sessions.
A further report from Matrixport claimed that Bitcoin is already up more than 40% this year, with about 35% of those returns coming from American trading hours. This suggests a massive wave of institutional support, showing that large market participants with rough liquidity to move the market are now buying up more Bitcoin.
Thielen added that based on previous data, institutions tend to buy more Bitcoin before investing in other assets. Also, the Matrixport research pointed out that institutional appetite for Bitcoin rose following the release of Consumer Price Index (CPI) numbers earlier this month.
A Strong Economy Spells Gains
The CPI has always been an important measure of inflation. And over the past year, the number has continued to rise as governments start to feel the effects of quantitative easing and stimulus spending during the coronavirus pandemic.
As a result, the Federal Reserve went on an aggressive strategy to curb CPI and keep inflation under control. This resulted in successive hikes to the interest rate, which affected investors’ ability to borrow and access capital.
Over the past few weeks, however, inflation numbers have improved significantly. CPI numbers released two weeks ago confirmed that inflation in the United States had dropped to 6.5% annually. That was done from 7.1% in November to a peak of 9.1% in June.
Since the CPI report was released, crypto prices have surged significantly. Many investors and analysts now believe that the Fed will be poised to cut back on its interest rate hikes – a move that will free up more capital for investors to back risky assets, especially cryptocurrencies.
Hopes for a drop in interest rates were further buoyed by the U.S. government reporting an impressive Gross Domestic Product (GDP) rise of 2.9% in December – much more than analysts had expected heading into the week. Once again, the markets have reacted positively as investors are even more confident of a massive rate slash from the Fed.
The Crypto Fear & Greed Index, a metric that determines market sentiment on cryptocurrencies, currently stands at “Greed” – the highest levels seen since the middle of last year. And although the market appears to be consolidating after two weeks of roaring gains, the mood is bright as investors believe that big money might be flowing into crypto soon.
Of course, all eyes will be on the Federal Open Market Committee (FOMC) meeting at the end of the month to determine the Fed’s position viz a viz interest rates.