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Analysts See 2019 as the Year of Institutional Crypto Investment

A number of investment funds and cryptocurrency firms are lauding 2019 as the year of institutional investor, 24 hrs before its arrival.

Many see large scale investment being re-examined in 2019 after being scared off by Bitcoin’s December dip. Wall Street notably stood back from the brink prior to the end of the year with Goldman Sachs’ much-publicized plans to open a crypto trading desk called “top-of-the-market-hype thinking” by one New York executive.

Nasdaq is already supporting crypto exchanges and the company is certainly not new to cryptocurrency’s underlying technology, blockchain. Apart from its long-term relationship with blockchain startup, Chain, it has recently announced a collaboration with cryptocurrency exchange Gemini.

Downunder, Henrik Andersson, chief investment officer of Apollo Capital Fund is upbeat on the prospect: “During the coming year we will see a gradual adoption from institutions,” he said, adding “We have the first US university endowments investing in funds” referring to major universities’ announcements that they were to invest in cryptocurrencies.

Harvard University, the Massachusetts Institute of Technology (MIT), Stanford University, Dartmouth College, and the University of North Carolina (UNC), have all made investments from their endowments into at least one crypto fund in 2018.

Another Australian, Every Capital’s director Tom Surman believes that the institutional phase has already begun, adding, “Massive retail offerings and institutional investors are probably the only groups that can meaningfully move the needle on the crypto market cap from here on.”

“The fact that David Swensen [Yale’s chief investment officer] put an investment into bitcoin — with his reputation on the line, his endowment on the line — tells you something…Some of the smartest people in the investing world think it’s a store of value,” said Mike Novogratz, who had been talking up the industry for much of 2018.

Around the world, national banking institutions continue to dabble with the crypto adoption, mainly as a step towards side-stepping internal financial complexities caused by sanctions or recession, but most banks are reticent to commit to launching cryptocurrencies of their own.  Most prefer to watch and wait.

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Alumni College Donations in Crypto Have Their Own Problems

Colleges and Universities around the world have experienced an increase in the amount of alumni donations being made in cryptocurrency.

Most, if not all, donations appear to be made by alumni wanting to share their good fortune in their digital currency investments. Last year was a fantastic year for crypto, as investors either seasoned or totally new to the concept of digital currencies and Bitcoin, made their fortunes very quickly.

It appears that many of these educational institutions were reluctant to take these, not so hard-earned, donations and some needed convincing.  Nicolas Cary, the co-founder of wallet creation website Blockchain, says his donation of 14.5 Bitcoin to his old alma mater, the University of Puget Sound in Washington State, was hard fought:

“I had to do a little bit of convincing for them to accept it. They wanted to dig in about how it works and what the process would be. We had a lot of conversations.’’

The problem appears to be that many colleges in the US simply don’t have a process for receiving such donations. This is particularly baffling as the cryptocurrency industry is young in both its own existence and the average age of its adherents, which in turn increases the likelihood of the alumni making donations using alternatives to the dollar.

Even Ivy League colleges such as Yale and Harvard who have recently announced crypto investment funds claim it becomes much more challenging in terms of creating a process for alumni donations. Harvard as yet hasn’t received a crypto donation, although Yale would like to do but hasn’t yet established a method of implementation.

Harvard University, the Massachusetts Institute of Technology (MIT), Stanford University, Dartmouth College, and the University of North Carolina (UNC), have all made investments from their endowments into at least one crypto fund.

Some of the reasons for the reticence up to this point can be put down to media hype; being associated with some of the bad press that occasionally sticks to crypto and other factors such as some of these currencies’ past volatility. Add to this, dealing with the IRS, and the donations can seem less attractive than those made in hard cash. However, with the recent crypto fund adoptions by some of America’s most respected educational institutions, this is likely to change.

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5 Top Unis Follow Yale Down Crypto Investment Path

Harvard University, the Massachusetts Institute of Technology (MIT), Stanford University, Dartmouth College, and the University of North Carolina (UNC), have all made investments from their endowments into at least one crypto fund. These are some of the highest caliber universities in the United States, all with endowments in excess of USD 1 billion, and can be considered institutional investors. These five universities follow the lead of Yale University, which invested some of its USD 30 billion endowment in two crypto funds, Paradigm and Andreessen Horowitz.

It was reported that David Swensen runs Yale’s USD 30 billion endowment, whose choices are copied by institutional investors worldwide. That appears completely true, with the sudden investment of five other major United States universities into crypto. Harvard University has the biggest endowment in the United States at USD 36 billion. MIT has an endowment of USD 15 billion, Stanford University USD 25 billion and UNC USD 3 billion.

These endowments represent a significant amount of money relative to the total crypto market cap of USD 203 billion as of 11 October 2018. Of course, only a small fraction of these endowments have been invested into crypto but if successful then more will likely be invested. Now that these academic heavyweights have invested into crypto, it is likely that other endowments across the United States will soon diversify into crypto, as well as other institutional investors.

The entrance of major universities into crypto investment is one of the first positive confirmations that institutional investors are dipping their toes into the crypto space. Institutional investment has been hyped as the likely cause of the next big crypto rally. The currently low crypto prices, with Bitcoin sitting near USD 6,000, represents an opportunity for institutional investors to buy in and get the most bang for their buck.

Jon Victor, the journalist who originally broke this news, says, “A move by endowments into funds that will directly bet on cryptocurrencies signals a major shift in investor sentiment toward the asset class, in the same way that institutions over the past decade became more willing to invest in private tech companies. Backing from such closely watched institutions could help validate cryptocurrencies, which are still considered too risky by many institutional investors.”

 

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