2018 is set to the year that institutional money enters the cryptocurrency market in a big way. The signs are everywhere, from Bitcoin television shows popping up, to major stock exchanges launching cryptocurrency trading, to phone companies creating blockchain-based smartphones, to services being created that will solely cater to institutional clients. Everywhere one looks there is evidence that big, institutional money is getting set to enter crypto.
This is a global phenomenon that isn’t limited to just one or two countries. It quite literally is a worldwide evolution.
As part of this globe-changing trend, LMAX, the global London-based FX exchange infrastructure with matching engines in New York and Tokyo, is preparing for a significant influx of institutional money this year:
LMAX, which is regulated by the Financial Conduct Authority, is seeking to outflank fledgling crypto start-up exchanges whose rapid growth has sparked concerns among traders over their technological reliability, security and money laundering controls.
LMAX also expects this will eventually encourage banks, asset managers and sovereign wealth funds to enter the market. “We believe the banks will come in the next 6-12 months and believe they will come on to venues like LMAX because we are a trusted entity,” said David Mercer, chief executive of LMAX. “We are seeing [names] you would get on other exchanges.”
A report by Tabb Group, the capital markets consultancy, last week said institutional investors have been inhibited from trading cryptocurrencies by a lack of regulatory clarity, data quality and adequate infrastructure.
Monica Summerville, head of European research at Tabb, said funds are “waiting for the right conditions to enter the market, and expected to begin happening this year.”
Tabb estimated that the top cryptocurrency exchanges generate up to $3bn in daily trading fee revenues.
However, it said the value of institutional investors trading large blocks of digital currency in the over-the-counter market could be at least twice that amount.
LMAX will trade cryptocurrencies on a transparent central order book, which is widely used in the foreign exchange, equities and futures markets. The group will also offer options to store assets.