A few days ago, Cardano (ADA) co-founder sent out a tweet to the effect that trillions of dollars are about to enter the crypto market. According to this tweet, the market may be down, but there is a lot going on, especially on the aspect of regulations. Once the regulatory environment is fully in place, this market will be headed to the moon. But Charles’s sentiments aside, the trillion dollar figure has been thrown around a lot in connection with Wall Street money coming into crypto. Now the big question is, where does the trillion dollar figure comes from, and why are regulations important for such big money to get into crypto?
Well, first to understand where the trillion dollar figure comes from, one needs to understand the meaning of institutional investors. When people think Wall Street, they think it’s a bunch of billionaires. However, when people like Charles talk of institutional investors, what they mean is pension funds, mutual funds and other players that invest in form of trillions. These are not gamblers who put money in projects on the basis of hope. They invest rationally knowing what to expect. In other words, they are smart investors, and their investments do move markets.
So why are regulations so important for these huge investors to get into the market? To understand why regulations are important in this space, one needs to look at the volatility that has characterized the crypto market to date. It is so volatile that prices can move up to 30% in a day. This usually happens because the crypto markets are so heavily manipulated, causing these unpredictable boom and bust cycles. It is very difficult for a pension fund to put money in such a market. No CEO of such a fund would be willing to gamble people’s livelihoods in such a market. That’s why regulations are very important, and it’s what Charles was talking about. Once the right regulations are in place, these investors will be confident enough to put their money in this market, since it will be less volatile.
On top of that the entry of proper regulations will also allow exchanges and other industry players to create the infrastructure needed to create the right infrastructure. One of the biggest aspect to crypto infrastructure that needs to come in place is custodial services. It would be difficult for someone to buy hundreds of billions of bitcoin for example, and store them in a normal crypto wallet, or leave them in an exchange. It’s just not practical. Big investors need better custodial services, such as the one being developed by Coinbase. Once more of these are established together with the right regulations, the crypto market will see an influx of the trillions that are being talked about.
One thing is clear, once the right regulations are in place, it won’t take long before the crypto market is worth over a trillion dollars. At that point, cryptos like Cardano (ADA) will be worth multiples of what it is worth today.