This is the year that institutional money will come into the cryptocurrency market, thanks to the development of trading infrastructure, Tabb Group said Tuesday.
"If 2017 was the year cryptocurrencies went mainstream, then 2018 is certainly shaping up to be the year they go institutional," the capital markets research and consulting firm said in a report by senior analyst Monica Summerville and colleagues.
Cryptocurrency investors have been waiting for institutional money to come into the market. Many expected the launch of bitcoin futures on major U.S. exchanges in December would have helped, but bitcoin has lost more than half its value since then.
The market capitalization of all cryptocurrencies has halved from $800 billion in January to around $400 billion this month, according to CoinMarketCap.
Three main hurdles — regulatory uncertainty, lack of market infrastructure and institutional-grade data sources — prevent institutions from participating in the cryptocurrency market at scale, the report said. That's forced much of the institutional trading volume into over-the-counter trades, which range from $150 billion to $30 billion in daily trading volume, the analysts said, noting comparisons to the early ages of the now-$5 trillion spot foreign exchange market.
But "the newest technology providers entering this space are led by people from the wholesale financial markets who claim they have spotted a significant market gap waiting to be filled," the analysts said.
"The word on the street is that significant additional institutional money is being amassed and is waiting for the right conditions to enter the market — and expected to start doing so this year."