The Director of Element Group, Thejas Nalval, said in an interview on CNBC that he is very bullish about Bitcoin due to its developer team and the investor community behind it. Further, he thinks Bitcoin will be the top choice for institutional investors.
“I look purely at the numbers. Bitcoin has the largest market cap. It has the most liquidity. So if I was to predict where an institution wants to come in first, Bitcoin would be number one on that list,” said Nalval.
Liquidity is an important issue for institutional investors. Institutional investors deal with large trades of usually USD 100,000 or more, and often USD 1 million, and sometimes even as large as USD 1 billion. These trades are only possible with proper liquidity. Less liquidity increases the amount of ‘slippage’, which is how much the market moves from a large trade. Slippage results in losses of money and if there is too much slippage, institutional investment becomes unprofitable.
Bitcoin has a market cap of USD 113 billion and as of 3 July 2018, trading volume in excess of USD 4 billion. Trading volume is a decent indicator of liquidity. This is more than double Ethereum’s trading volume, and almost all other cryptocurrencies have trading volumes less than USD 1 billion. Clearly, Bitcoin has the most trading volume by far and, therefore, the most liquidity and least slippage, making it the most ideal cryptocurrency for the large trades institutional investors require.
Additionally, Bitcoin is less volatile than other cryptocurrencies and seems to lead the pack. If Bitcoin goes up, all other cryptocurrencies tend to go up and if Bitcoin goes down, all other cryptocurrencies tend to go down, except more violently. Less volatility is better for large investments.
This is not to say that institutional investors won’t be investing in other cryptocurrencies; they will probably invest in a full spectrum of crypto to diversify their portfolio. However, Bitcoin is the gold standard of cryptocurrencies and the bulk of institutional money is likely to go into Bitcoin.
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