There has been a lot of excitement lately about the introduction of cryptocurrencies among institutional investors. As the price of Bitcoin, and subsequently its related assets, skyrocketed over the past year, many investors flocked to this emerging market to place their bets.
Options and futures markets have received unprecedented attention during this time, which illustrates the emergence of these cryptos as alternative investment vehicles.
Income funds offered by digital asset investment firms are one of the product categories that are attracting a lot of attention from investors. In a recent podcast interview, Alexander Blum, founder of Two Prime Asset Management, gave some of the reasons for this. He said,
“There’s a huge amount of interest in the demand for returns from institutions and asset managers in general … when things go up 40 a month it’s a lot easier to raise money because everyone has FOMO and wants to get into things.”
What makes spot trading options more attractive over future options and DeFi staking stable coins is the higher return they can get compared to high-risk corporate bonds and other options in the public market. Additionally, double-digit returns on low risk factors are perceived as more lucrative due to the relentless pressures of new money and traditional investment vehicles with low interest rates.
According to Blum, four different categories of investors have emerged over time looking for funds offered by companies like him. First, there are high net worth individuals who believe in the importance of crypto in their portfolios and understand the technology behind it, but delegate management to companies for reasons of time. Second, there are small to medium sized Registered Investment Advisers (RIA) who drop a percentage under pressure from their clients who feel they have missed something.
In addition to smaller institutions that are similar to the first category, there are also venture capital funds that are looking for alternative investment vehicles for excessively accumulated capital that can offer lower risk and high returns. Most surprising, however, is the rise of central banks and central governments as they approach these funds to move capital from their sovereign wealth funds into crypto.
“I speak to a number of SWFs, but it’s just a different mindset and they move very slowly and that’s why they’re talking, but they don’t have them as investors yet.”
This enthusiasm among seasoned investors is reason enough to believe that Bitcoin’s bull run is far from over. Blum examined the trading habits of these investors in terms of options and futures trading to highlight this.
“If you look at the options market, the market is betting on a secondary rally in price in the third and fourth quarters, which is where the skew of the options lies. People buy calls that are above the current price, which suggests they believe the price will go up, and that’s where most of the calls are currently being made. I think that’s a positive thing. “
When asked where he thinks Bitcoin prices should go in the future, the investor said:
“I think we are at the bottom or you know the 30-32k is being held pretty strong here for a while and we will see an upward divergence at this point.”