There has been widespread excitement lately, regarding the adoption of cryptocurrencies among institutional investors. As the price of Bitcoin and subsequently, its correlated assets surged up over the past year, many investors flocked to this emerging market to place their bets.
Options and futures markets have received unprecedented attention over this time, conveying the emergence of these cryptos as alternative investment vehicles.
Yield funds offered by digital asset investment firms are one of the product categories garnering ample attention from investors. In a recent podcast interview, Alexander Blum, founder of Two Prime Asset Management, highlighted some of the reasons for the same. He said,
“There’s a huge interest in demand for yield in terms of you know institutions and money managers in general… when things are going up 40 a month it’s much easier to raise money because everyone has FOMO and wants to get into things”
What makes spot trading options more attractive as against future options and DeFi staking of stable coins, is the higher yield they are able to produce, as compared to high-risk corporate bonds and other options in the pubic market. Moreover, with new money being printed ceaselessly and traditional investment vehicles providing low-interest rates, double-digit yields with low-risk factors are being perceived as more lucrative.
According to Blum, four different categories of investors have emerged over time that are looking at funds offered by firms like his. Firstly, there are high net worth individuals who believe in the importance of having crypto in their portfolios and understand the tech that goes behind it but delegate the management to firms due to time constraints. Secondly, there are small to medium-sized registered investment advisors (RIA) who relegate some percentage, under pressure from their clients who feel like they are missing out.
Apart from smaller institutions that are similar to the first category, there are also venture capital funds that are looking for alternative investment tools for excessive accumulated capital, which can offer lower risk and high yields. Most surprising, however, is the rise of central banks and central governments that are approaching these funds to relegate capital from their sovereign wealth funds into crypto.
“I’m talking to a number of sovereign wealth funds but it’s just a different mindset and they move very slowly and so they’re ongoing conversations but don’t have them as investors quite yet.”
Such enthusiasm from seasoned investors is reason enough to believe that Bitcoin’s bull run may be far from over. Blum looked at trading habits from these investors in terms of options and futures trading to highlight the same.
“If you look at the options market, the market is betting on a Q3 and Q4 secondary rally of the price is where the skew of options. People are buying calls that are above the current price suggesting they think the price is going to go up and that’s where the majority of calls are placed currently and so I think that’s a positive thing.”
On being asked where, according to him, were Bitcoin prices are slated to go in the future, the investor said:
“I think we’re at the low or you know the 30-32k is held pretty strong here for a while and we’ll see a divergence upward at this point.”