The Market Heading Towards Mass Institutionalization of the Crypto Industry, Says Ape Terminal Founder Hassan Hatu Sheikh

The crypto market has been on a tear this year, having recovered remarkably from Nov. 2022 lows. Since falling to about $16,000 after the FTX implosion, Bitcoin has already made a new all-time high (ATH) at nearly $73,740 ahead of the halving in April, while the total crypto market cap is nearing the $3 trillion mark.

So, with crypto prices showing renewed interest and the return of euphoria in the market, where exactly are we heading this time? 

A major turning point for the industry came last year when several traditional financial institutions filed for investment products tied to the price of Bitcoin. Then, in January, the US Securities and Exchange Commission (SEC) approved nearly a dozen of these Spot BTC ETFs, which gave investors a way to dabble in Bitcoin without having to own the asset. 

This is a great opportunity for cautious investors to dip their toes in crypto via a regulatory product without having to worry about setting up a digital wallet or custody of crypto assets. So far, these products have collectively recorded $11.7 billion in total inflows, with BlackRock’s IBIT Fund in the lead with $13.5 bln, followed by Fidelity’s FBTC at almost $7.5 bln. At the same time, Grayscale has seen net outflows of $14.36 bln, bringing its AUM to just under $23.8 bln.

This shows a clear shift in the market. Unlike the last bull run, which was fueled by retail investors, this time, it all seems to be the institutional play, especially when it comes to majors. 

A “Psychological Shift”

While the broad crypto market is seeing a rise in value, Bitcoin is clearly leading the way, driven by support from major financial institutions. Goldman Sachs has also been reporting “a big sea-change” in terms of both the volumes and the types of clients, enabling the giant to build on its crypto trading desk.

This interest from traditional market participants is expected to grow further as ETF providers ramp up their promotion efforts. Additionally, spot Bitcoin ETF options and an Ethereum Spot ETF are awaiting regulatory approval.

Interestingly, not only is TradFi filing for spot ETH ETF, but they are also introducing staking for their investors and onboarding the tokenization train, which will strengthen these two trends and legitimize the industry. 

The “psychological shift” prompted by ETFs in institutions has compelled crypto companies to expand their services to TradFi. For instance, Kraken recently announced the launch of its dedicated crypto solutions for institutions. Most recently, crypto compliance platform Keyring raised capital to unlock DeFi for TradFi, while institutional crypto wallet provider Utila raised capital to facilitate a tokenization boom.

Even regulatory movements are advancing this phenomenon, with the UK’s Financial Conduct Authority (FCA) allowing stock exchanges to list crypto ETNs, but only for institutional investors. Moreover, ESMA has finalized MiCA rules that will further ease the path for institutions to engage in crypto. In a similar vein, Thailand’s SEC is also permitting institutions and UHNWI to invest in crypto ETF funds.

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The entry of institutional exchanges, OTC marketplaces, clearinghouses, and custodians shows increasing acceptance of digital assets as a legitimate investment class.

Innovation & Vast Adoption

While institutions are sticking to majors and largely avoiding high-risk, high-return investments like AI, meme coins, and BRC-20 tokens, it’s precisely these ventures that retail investors are embracing.

While retail investors feel priced out from BTC and ETH, they are fully embracing the fun of gaining financial freedom with assets like DOGE, Dogwifhat (WIF), Book of Meme (BOME), SLERF, Popcat, Mog Coin, and Jeo Boden (BODEN) capturing their interest. For retail, entertainment and price appreciation go hand in hand, and this trend is likely to continue in the intermediate future.

“The ongoing trend is a bit different from the last bull market, with institutions coming in droves thanks to the ETFs. As we have seen, large investors favor both Bitcoin and Ethereum. But while it is starting with the majors, soon, the institutionalization trend will take over the entire industry, which has already started with tokenization and staking,” said Ape Terminal Founder Hassan Hatu Sheikh.

According to Hatu Sheikh, as the industry embraces TradFi’s needs, this institutional era of crypto will lead to innovation. This may even help a crypto-native app finally break into the mainstream.

While many believe this is going to be an institutionally led cycle, retail’s effect can’t be neglected either, especially on the alternative coins and narratives. 

Beyond the meme coin and institutional narrative, the macroeconomic environment plays a critical role in the market’s future, while the Federal Reserve is looking for “great confidence” that inflation is receding before cutting rates, a stance that generally supports price increases.

In the crypto market, the upcoming halving is likely to lead to consolidation within the Bitcoin mining industry as miners’ profitability takes a hit with a 50% cut down in their BTC rewards.

Overall, ETFs aimed at capturing pension fund and other traditional finance (TradFi) investments, staking for passive income, stablecoins for remittances, tokenization to bridge the gap between the traditional market and the crypto world, and meme coins fueling retail mania will collectively drive crypto adoption forward. This means, this time, cryptocurrencies are poised to gain even wider adoption and may end up putting previous rallies to shame.