Ex-Citigroup exec claims lack of liquidity is preventing institutions from entering the crypto space

A former investment banker believes institutions are struggling to enter the cryptocurrency space due to a lack of liquidity and market cap

Former Citigroup executive Hwang Hyeon-cheol has said that while cryptocurrency’s market cap is smaller than Samsung’s, it’s difficult for institutions to enter the space due to a lack of liquidity.

Institutional investment in cryptocurrency has been a contentious issue over the past few years. The listing of Bitcoin futures on CBOE and CME in 2017 was thought to be an entry point for institutions but instead marked the top of the bull run, with price subsequently falling from $20,000 all the way down to $3,150.

Samsung has a market cap of more than $900 billion. Cryptocurrency on the other hand has a dwarfed market cap of just $130 billion, which could be a deterrent to hedge funds and investment firms who will be put off by a lack of liquidity.

Hyeon-cheol told local media outlet Blockinpress: “For institutional investors to enter the cryptocurrency market, the market’s liquidity and size have to grow to a certain point. Currently, the valuation of all cryptocurrencies combined is smaller than the market cap of Samsung. It is difficult for a major institution to consider investing in such a small market.”

One entry point for institutions has been the OTC market, with a number of OTC desks offering deep pools of liquidity to hopeful investors.

Volume in the OTC markets is on the increase, but the unregulated nature of the market, in which price manipulation is prevalent, is still acting as an off-putting factor for the digital asset class.

Hyeon-cheol added: “The fact that OTC volume is bigger than the volume of cryptocurrency exchanges and is increasing shows that the market share of cryptocurrencies is somewhat clustered to a small group of investors. It also suggests that most trading occurs around whales. Most whales engage in speculative investment or have an advantage on data, and as such, it is not ideal.”

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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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