Why Institutional Investors are Embracing Crypto Despite Regulation

The Ripple Effect of Regulation

Hu Liang, co-founder and CEO of Omniex, points out that the regulatory landscape is not a hindrance but a developing field. Regulators are grasping what crypto means—a challenging task given the market’s infancy. He highlights the recent ruling allowing crypto custody offerings by traditional banks as a huge positive step toward broader acceptance.

Institutional Interest Explained

What fuels the fire of institutional investors’ interest in digital currencies? They are magnetically drawn to crypto’s potential as a long-term appreciating asset. Bitcoin’s trajectory over a mere decade speaks volumes. Hu describes how digital assets have significant utility, serving as payment mechanisms and conduits for decentralized finance.

Diverse Strategies and Portfolios

Not all institutional portfolios sing the same tune. Some focus solely on heavyweights like Bitcoin or Ethereum for their appreciation potential, while others embrace diversity with a mix of assets reflecting varied risk appetites. ‘It’s similar to equities,’ Hu explains. ‘You can own the same five assets but trade them quite differently.’ Imagine playing poker but switching up the rules every hand!

Volatility: The Double-Edged Sword

When it comes to volatility, Hu sees it as a paradox. For long-term investors, it’s a bump in the road; for traders, it’s the juicy steak they crave. ‘If volatility didn’t exist, traders would be out of a job!’ Hu quips. However, he notes that too much volatility could scare off larger institutional players who need steadier grounds, like pension funds seeking predictability.

Governments and the Crypto Landscape

As for governments, they’re like the kid in class finally paying attention to the lecture. With daily regulatory announcements worldwide, many nations are exploring Central Bank Digital Currencies (CBDCs) and blockchain technologies. The challenge? Coordinated efforts across borders—an uphill battle exacerbated by global events.

The Bright Future of Digital Payments

Hu envisions a vibrant future for digital payments blossoming into three forms: the digitalization of existing systems, the merger of fintech into traditional finance, and true digitalization with CBDCs at the helm. It’s a game-changer that could redefine our payment experiences. As for cash? Hu jokes that it’s practically obsolete for him, echoing the sentiment that we’re already living in a digital payment world.