Institutions Are Coming for Your Crypto

A string of developments this past month suggests that - to put it bluntly - the institutions are coming for your crypto.

What is clear is that, for a time at least, there will be an awkward and increasingly intensified clash of cultures between the pinstripes of Wall Street and the hodlers of crypto land.

While an influx of institutional money may at some point drive up crypto prices, that clash portends more uncertainty and volatility for at least a while longer.

If corporations - banks, hedge funds and brokerages, first, then non-financial enterprises, second - are to participate in the crypto economy, the legal, compliance, insurance and risk management demands they live under almost require that they pass off the risk of holding such assets to outside custodians.

Let's face it, an increasing amount of the world's crypto holdings is in the custody of third-party operators, whether it's with custodial wallet providers such as Coinbase or at centralized crypto exchanges that comingle customer assets with those of others.

At the same time, a number of providers that started as crypto companies have earned regulatory status as qualified custodians, allowing them to also go after compliance-sensitive institutional investors as clients.

All are aimed squarely at the expected arrival of institutional investors into the crypto world.

Holders of bitcoin, ether and other crypto assets that might now receive a flood of incoming orders from these deep-pocketed investors sometimes salivate at this idea - essentially because they expect prices to rise.

Wall Street types like to talk about crypto as a new asset class, one to add next to stocks, bonds and commodities in their clients' portfolios.

For the time being at least, while early-adopting retail players of varying size still dominate the crypto community, this "Asset class," if it can be called that, is going to behave in a very different way from others.