Wall Street is taking a “wait-and-see” approach amid the bear market, says Ari Paul, the co-founder of crypto investment firm BlockTower Capital
On Twitter, Paul tweet stormed explaining how institutional viewpoints about cryptocurrencies fall into three categories:
1. Venture capital mindset: Is there value creation we can capture with early-stage investment?
2. Passive Bitcoin or index exposure: Is this going to be digital gold or a portfolio hedge?
3. Is this a market where we can generate profits as service providers or through active trading?
Paul also mentions that these viewpoints are not mutually exclusive and that each has its respective obstacles and catalysts to drive adoption and he believes that many investors are in a holding pattern due to regulatory uncertainty amid the prolonged market slump.
Dan Morehead, the CEO of Bitcoin investment firm Pantera Capital, shares the same sentiment and believes that once the price recovers, the institutional investors will eventually start wading in crypto en masse.
Paul says that investors are viewing crypto as a hedge want “statistical evidence” of its ability to hedge fiat money along with a “pretty-looking chart” to support this claim.
The lack of regulatory clarity surrounding Bitcoin custodianship, anti-money-laundering (AML), and know-your-customer (KYC) practices has confused, says Paul. Also the dearth of success cases about real-user crypto adoption — has had a chilling effect on the industry.
Paul thinks that the mainstream interest and education about cryptocurrencies is rising, but people are waiting for a leader, someone to take the plunge before they act.
Paul believes he may have overstated the timeline for institutional investments into crypto. “I’ve been too optimistic about the pace of institutional adoption in the past,” Paul writes. “It’s coming, but I can’t estimate which quarter (Whether that’s this year or 2022) that we’ll see a big spike. As a humble guess, something like Q3 2019.”
The crypto market is relying on institutional investors to take the industry to the next level. The expected influx in late 2018 got derailed by the unexpectedly long crypto bear market. Institutions got scared off by the protracted downturn, says JPMorgan Chase analyst Nikolaos Panigirtzoglou.
Bearish sentiment dominates the market, but people like Jeremy Allaire, CEO of a circle, remain undeterred. Being a true believer in crypto, he says that Bitcoin skeptics are that way because they’re unfamiliar with the new technology.
“People throw around ‘crypto’ like it’s a bad thing — it’s scary,” Allaire said in January 2019. “Guess what? Cryptography is at the foundation of protecting modern society, human privacy. It’s a fundamental tool of our cyber defenses. It’s a fundamental tool of every corporation.”
Allaire believes humanity won’t be able to survive the digital age without digital currencies.
“Crypto is fundamental to the future,” Allaire said. “We need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.”
“We see this as much more transformative even than the web. We think this has a long arc that will have a far greater impact on our civic institutions and our economic institutions,” says Allaire.