Cryptocurrency is taking over Investment: Why the delay in Institutional adoption?
A while back, shares and stocks were the go-to investment option especially for people who wanted to grow their money in the long term. Well, some people still believe in this form of investment but probably because they have tested it and can give testimony of its good and bad. The new generations have something else at their disposal which is seemingly working as well; cryptocurrency. Although there is still some level of skepticism as far as investment in cryptocurrency is concerned, some people are reaping profit in the millions. Why then has this new virtual currency taken so long to be embraced by businesses as a form of legal tender?
There is no clear regulatory framework
At the start of 2019, one cryptocurrency featured in the news because the owner had passed on and no one, even his wife knew how to access his account. The result was massive panic for investors into his fund, which begs the question, who controls this space? You would understand them if financial bigwigs thought twice before accepting cryptocurrency as a currency to trade with. Lack of regulation in any financial sector opens up chances for fraud to occur.
Lack of channels connecting multiple monies
There have been talks on the formulation of frameworks to open up channels that link traditional money and cryptocurrency. Many people who have followed the journey of cryptocurrency must be aware of the ICE’s Bakkt exchange that is proposed for use as an EFT channel. If such channels remain closed, it hinders serious institutions from taking up and accepting cryptocurrency. What does it take to open up these channels? Political goodwill perhaps! Political influence is a great force, an email would open doors and so would lobbying but the will of the most powerful party at any given time prevails.
Irrational and immature markets
If you look at the cryptocurrency trends from a bystander point of view, it does appear that those involved in the trade are actually gambling. The nature in which money grows in uncertain terms when invested in cryptocurrencies causes sophisticated traders to shy away from it. While price volatility is viewed by some traders as an opportunity to grow their portfolio, others and especially institution based, see this as a hindrance.