Prepare for the Best or the Worst: Institutional Investors Enters the Crypto Realm.
“This year has seen remarkable entries of the big fishes into the crypto realm and many believe that this is the push that was required by the crypto industry to flourish and enter the mainstream businesses as well as lives of people around the world. But, there are downsides to these entries that must be understood to actually acknowledge the institutions for their so-called good deeds.”
How People Perceive the Entry
Almost everyone welcomed the entry of the Institutional investors such as Michael Saylor of MicroStrategy, Elon Musk of Tesla, El Salvador, VISA, PayPal into the crypto markets as the prices of all the cryptocurrencies skyrocketed in 2021. The crypto industry for the first time has started to show the promise that it was intended to show from the beginning. The trust on the crypto sphere is at its maximum and it can be considered as the best time for the crypto investors.
The institutional investors bring with them various opportunities of growth, innovation and regulations. This creates a sense of environment where the new cryptocurrency projects can thrive whereas the older ones scale to new heights. All the financial experts were waiting for this time in the journey of the crypto industry when it is mass adopted all around the world.
What can go wrong?
The institutional investors not only bring the positives but there are the downsides to this entry into the crypto world that can defeat the very purpose of the crypto industry as a whole.
Can lead to Centralization
The entry of a big corporation with billions of dollars can buy a huge stake in the cryptocurrency projects defeating the very purpose for which the cryptocurrencies are made. The cryptocurrencies were built on the idea of decentralization and as more and more power is shifted towards the few, crypto industry might see a challenge of facing centralization in the near future.
Can Manipulate the Market
Huge investments in the cryptocurrencies by these large corporations, increases the chances of market manipulation. The crypto market is extremely volatile and even a small FUD can wipe off billions of dollars in seconds. Elon Musk’s tweets are a trailer of the extent of manipulation that can be done in the crypto markets and this can prove fatal for the retail investors who will bear all the loss from a large scale divestment from a corporate.
Can Lure Attackers
The financial institutions such as PayPal, VISA etc. have a traditional banking structure that is tailor made to serve the traditional money exchange. The adoption race to outcompete their rivals can result in incompatible addition of the blockchain technology with the existing Fintech technology leading to loopholes that can attract many hackers and can result in huge losses to all the parties concerned and can give a bad name to the blockchain technology and the crypto industry as a whole.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
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