“Just wait until institutional investors jump in” has long been a rallying call for the cryptocurrency faithful.
It appears they’ll need to keep waiting a little longer, with nearly 70 cryptocurrency-focused hedge funds that mostly cater to pension funds, family offices and wealthy individuals closing this year, according to San Francisco-based Crypto Fund Research. The number of new funds launched is less than half the number started in 2018, the researcher said.
The retrenchment comes amid another volatile year for cryptocurrencies, with bitcoin and its peers once again posting the kind of swings that make institutional investors uncomfortable. While high-profile advocates such as Fidelity Investments and the New York Stock Exchange’s parent company plow ahead with initiatives seeking to make it easier to own digital assets, the potential customer base seems to be disappearing at a quick clip.
“The market is definitely retail driven and will remain so for the foreseeable future,” said Nic Carter, co-founder of Boston-based cryptocurrency market tracker Coin Metrics.
At the same time, one of the other projected lures for professional money managers — regulated futures — continue to be greeted with a muted response.
Trading volumes on bitcoin futures on exchanges like Chicago Mercantile Exchange and Bakkt, which began offering futures that settled in bitcoin in September, have increased, but are still relatively low. CME’s daily volume this year averaged about 32,500 bitcoins, or $236.8 million at current prices, with more than 3,500 individual accounts trading, the company said in November.
That’s just a drop in the bucket compared with the volume on less-regulated trading platforms outside the U.S. Aggregate Bitcoin futures volume — mostly on exchanges letting any retail speculator buy contracts with as much as 125 times more money than they put down — exceeds $10 billion a day, according to tracker Skew.com.
That hasn’t stopped Fidelity from joining…