Lee: Crypto’s Not Big Enough for Institutions
In a recent interview, Tom Lee explains:
There’s a mechanical issue for crypto in terms of infrastructure that’s needed, but there’s probably also a size of market issue.
He believes that cryptocurrency might be “too small” for institutional players, who are used to investing in major stocks, precious metals and other assets that are larger or have more range to them. He states:
Gold is nine trillion. The stock market is 66 trillion. The bond market is 86 trillion. Bitcoin is not even half a percent of the total assets. If you’re asking someone to allocate one percent to bitcoin - that’s like triple the market weighting, like you’re asking someone to make a massive bet even though it’s one percent of their assets because bitcoin is that small. It’s probably correct I think about one percent of the United States owns bitcoin and at that size, it’s too small for an institution. It’s a hobby.
Another problem? Lack of regulation. While this is an age-old argument, it’s still one that applies in that laws are relatively scarce when it comes to monitoring and regulating the crypto market. As it stands, Lee says that there’s nothing getting in the way of the U.S. just initiating a full ban on crypto activity, a step recently taken by countries like China.
There’s not enough legal and regulatory protection for bitcoin in the U.S. to prevent a White House executive order banning bitcoin, like nothing today would prevent bitcoin from being outlawed in the U.S.
As it stands, he doesn’t believe institutional players are confident enough to take part in a market that doesn’t have federal backing.
At the same time, while Lee brings up some interesting and harsh points, they do somewhat go against other reports or evidence that suggests a growing institutional presence in the crypto space. For example, in London, OTC firm known as the BCB Group has recently submitted a new report suggesting that institutional interest in crypto within the U.K. has expanded greatly over time despite the mess of last week’s crypto bloodbath.
Evidence Proving Otherwise?
Overall, BCB Group suggests that it has well over $100 million in assets being traded each week, and that it’s not out of the question to see “tens of millions of pounds” traded in a single day.
Furthermore, several Wall Street and institutional firms are getting more involved in crypto and blockchain. One such company is Morningstar, a credit ratings agency that is now looking to offer a wide range of “custom crypto services” to its customers.
Cryptocurrency is a digital currency that uses encryption (cryptography) to regulate the generation of currency and verify the transfer of funds, independently of a central bank. Cryptography is the practice and study of techniques for secure communication in the presence of third party adversaries.
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