Crypto meltdown opens window to institutional investors, say experts

BY CHARLES ABUEDE

Could the continuing hullabaloo in the crypto space be another dot-com bubble like the type that occurred in the year 2000? No one can really come up with specific answers as we can obviously see that the global crypto market has been on meltdown across boards following a dip in market capitalization by 4.8 percent over the past week to $1.75 trillion, according to a report by Coinmarketcap. But regardless of the dip witnessed, experts are saying this presents an opportunity for institutional investors to begin taking strategic positions at better levels.

It is this recent meltdown in the crypto market that experts say could be the big catalyst to trigger huge trading opportunities for institutional players to take a favourable position in the market in the coming days.

After almost a month of consistent outflows, a report by Coinshares revealed that the recent inflows recorded were precipitated by advantages taken by investors by adding to their position the substantive price discounts, but the report also carried some degree of scepticism as past week’s negative sentiments had run its course as the recent investment product trading activity did not match that historically seen during extreme price weakness periods.

“The markets are in meltdown but this may present an opportunity for institutional players to start building positions and push stablecoin regulation to provide more confidence,” said Martha Reyes, head of research at BEQUANT, the digital asset prime brokerage and exchange.

Continuing, Reyes said, “While we can’t call the bottom and correlations among asset classes remain elevated, Bitcoin has survived corrections of 70-80 per cent in the past. This may be an opportunity for institutions to build positions at better levels.”

According to her, the uncertainty around stablecoins is a concern, adding that this uncertainty could lead to another flush out; and that the market may finally get the much needed regulatory framework that could entice institutions in. “Regulators tend to be reactive, so this may be the catalyst for greater stablecoin regulation,” Reyes said.

Relatedly, the crypto markets went down around 16 percent overnight as Bitcoin fell below $28,000 in the early days of the week, and to levels last seen in the year 2020 before creeping back to above $30,000.

Markets across the board have been in meltdown, with high declines in investments in the likes of Peloton, Robinhood and Coinbase by 91 percent, 89 percent and 77 percent, respectively.

Elsewhere in the US, the S&P 500 lost over 4.5 percent at some point in the week, while the Nasdaq Composite fell to its lowest level since November 2020, falling by more than three per cent.

Also, Tether dropped to 97 cents, losing its parity with the U.S. dollar. On Coinbase, it fell as low as 96 cents as traders sold USDT for U.S. dollars amid poor sentiment for stablecoins in crypto communities.

In a snapshot of the coin flows during the past week, Bitcoin-based investment products saw the largest portion of movements, amounting to $45 million. Despite the fact that these products experienced the most positive sentiment from investors recently, total assets under management for Bitcoin-based products have tumbled to a level seen during a similar period of lower sentiment towards the beginning of the year.

Also, Ethereum-based investment products sustained their negative smudge, with outflows amounting to $12.5 million, bringing total year-to-date outflows to $207 million, which represents 0.8 percent of AuM overall.

But, in the midst of other altcoins, Solana was the only one to see any notable inflows, amounting to $1.9 million, while Cardano and Ripple each received $200,000 in inflows, and Polkadot saw $400,000 in outflows. Furthermore, multi-asset investment products also saw inflows over the past week, which amounted to $1.7 million.