Institutional Investors No Longer Interested in Bitcoin: JP Morgan

Institutional investors are quickly losing interest in Bitcoin, JP Morgan has stated in recent research. According to the bank, key flow metrics have dwindled in recent months indicating reduced interest from the professional investors. The research cited interest in Cboe Global Markets which is at its lowest since Bitcoin futures launched a year ago. The median transaction volume has dropped by over 96 percent as well, further indicating dwindling interest.

Meanwhile, a new report by Diar has suggested that institutional traders may have shifted to over-the-counter platforms. The report alleged that these traders are turning to these markets as they have high liquidity. However, the working hours continue to be an Achilles heel for OTC platforms. Diar revealed that OTC platforms are open for trading only 31 percent of yearly tradable hours.

Is Bitcoin Losing Traction with Institutional Investors?

Bitcoin was trading at $3,565 at press time, down over 80 percent from its record high. Interestingly, Bitcoin hit its record high exactly a year ago. The currency has had many retail traders in panic mode after almost testing the $3,000 level recently. And according to researchers at US’ largest bank, institutional investors are just as panicky.

In a research note seen by Bloomberg, the bank cited the prolonged slump in prices as the biggest concern for these investors.

Participation by financial institutions in Bitcoin trading appears to be fading. Key flow metrics have downshifted dramatically, including in futures markets and in average volumes.

In 2017, interest from well-funded global conglomerates in Bitcoin was applauded by the crypto community. This was viewed as the all-important step that would legitimize Bitcoin in the eyes of the masses. The deep pockets these investors brought with them was also quite welcome.

This interest is waning. As revealed by the bank, open interest on Cboe’s Bitcoin futures has hit its lowest level since the futures launched a year ago. It’s not any different on CME either, with the platform experiencing the bottom of its range this year.

The daily median transaction size has also taken quite a hit, signaling a decline in deep-pocketed investors. When Bitcoin was trading at record highs last year, the median transaction size stood at $5,000. It has dropped by 96 percent and currently stands below $160.

The research note also noted that Bitcoin hasn’t been the only casualty. However, the other cryptos have suffered disproportionately, with some feeling the heat more than others.

Deserting the Marketing or Changing Strategy?

While JP’s research indicates that investors are deserting the market, Diar’s research indicates a shift in strategy. The blockchain and crypto research firm concluded that these investors are turning to OTC platforms such as Coinbase’s which witnessed a 20 percent hike in trading volume this year. In contrast, Grayscale’s Bitcoin Investment Trust (GBTC) witnessed a 35 percent decrease this year.

Some crypto and trading experts have also stated their belief that institutional investors are accumulating as the retail investors dump their crypto assets. One of these is Jake Chervinsky, a securities litigations lawyer with New York-based global law firm Kobre & Kim LLP. He recently stated:

Investors, with bitcoin trading under $4,000:

Retail: "should I sell and buy back lower? should I open a short? should I just give up? is it going to zero? was this whole crypto thing a scam after all?"

Institutions: "please keep selling us cheap bitcoin. thank you."

— Jake Chervinsky (@jchervinsky) November 25, 2018

However, as revealed by Diar, the slowdown could be a combination of both diminishing interest and a rising popularity of OTC markets. With Bakkt set to launch in a month’s time, the market will get a better measure of institutional interest in Bitcoin.