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Institutional crypto trading: Benefits and challenges

Once a space exclusively for retail traders and tech individuals, today’s crypto market extends far beyond the narrow circle of tech-savvy people to large financial companies, banks, and tech corporations.

Today’s institutional crypto market includes such investors as MicroStrategy, Grayscale Investments and Square, with banks including Morgan Stanley and Goldman Sachs.


Today, we will discuss the benefits and risks for companies that tap into the crypto sector.

Crypto trading for institutions

Large companies buy crypto through different channels – an institutional trading platform (like Binance or WhiteBIT), hedge funds (like Pantera Capital), or directly buying assets.

The most common strategy among institutions is holding assets for the long term.

It especially refers to such popular coins as BTC and ETH.

However, many companies engage in active crypto trading, relying on trend analysis, and become market makers for crypto platforms.

Another way for institutions to enter the crypto market is to participate in ICOs and token sales headed by crypto startups. Thus, they diversify their portfolios and reduce risks.

Challenges that institutions face

Here are the main risks for institutions:

1.Volatility – crypto prices can experience rapid and unpredictable fluctuations, leading to potential financial losses.

2.The likelihood of financial destabilisation – the growing number of institutional trades can influence market trends and prices. While this impact can be advantageous, it also raises concerns about the possibility of financial destabilisation.

3.The lack of regulatory compliance in cryptocurrency creates uncertainty for many companies that enter the crypto market.

Benefits of institutional crypto trading

Institutional crypto trading offers numerous advantages.

Firstly, it provides access to a diverse range of digital assets, allowing institutions to build well-rounded portfolios.

Also, institutional involvement often creates increased liquidity, building a more stable market.

Moreover, the credibility of institutional players contributes to greater market maturity and regulatory recognition, attracting more participants.

The involvement of institutions also facilitates the development of advanced trading tools and strategies, enhancing overall market efficiency.

Getting started in institutional trading

Getting started with institutional trading involves several key steps:

1.Ensure compliance with requirements related to crypto trading in the jurisdictions where you operate.

2.Open accounts with reputable cryptocurrency exchanges that work with institutional clients.

3.Define risk tolerance levels, implement stop-loss measures, and establish clear risk management protocols.

4.Invest in the necessary technological infrastructure, including secure trading systems, data analytics tools, and connectivity solutions.

5.Use security measures to protect assets and sensitive information.

6.Conduct due diligence on potential trading partners, exchanges, and counterparties.

7.Cultivate relationships with other institutions, market makers, and key players in the crypto space.

Despite facing challenges like market volatility or financial destabilisation risks, institutional trading brings significant benefits. It allows for diversification of portfolios with digital assets, boosts liquidity, and helps the market become mature.

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