Tom Lee, Managing Partner and Head of Research at Fundstrat Global Advisor, considers 1% of U.S. citizens own Bitcoin (BTC). However, he explained that this market is still too small for an institution to enter. He said that in an episode of The Scoop podcast.
1% Of U.S. Citizens Own Bitcoin
During the recent conversation, Mr. Lee talked about which are the current challenges institutions face in order to enter the cryptocurrency market.
In the last years, the crypto industry expanded thanks to retail investors that placed their funds in a wide range of crypto projects. Nevertheless, institutions remained on the sidelines without a clear involvement in the space.
According to Lee, there are two main challenges that institutions are facing. The first one is related to a mechanical issue in terms of infrastructure. The second thing is related to the size of the market.
At the moment, the size of the market is too small for institutional investors. Currently, the market capitalization of all the cryptocurrencies is equal to $218 billion. This is yet small compared to the $9 trillion market cap of gold, the stock market with $66 trillion or the bond market with $86 trillion.
In addition to it, Lee mentioned that he thinks about 1% of the U.S. owns Bitcoin, which is a small market for an institution.
“If you are asking someone to allocate 1% to Bitcoin, that’s like triple the market weighting, like you are asking someone to make a massive bet even though it’s 1% of their assets because Bitcoin is that small,” Lee said.
Furthermore, the lack of infrastructure in the market is also making it difficult for companies and larger investors to enter the cryptocurrency space. This happens because most of the exchanges and firms offering crypto-related services are focusing on retail investors rather than on institutions and larger players.
Nowadays, some companies, including the Intercontinental Exchange (ICE), are working in order to offer solutions to traditional and larger investors. In the future, with a better regulatory environment around the world, more firms could enter the space and solve some of the current issues faced by the market.
Regulatory uncertainty is affecting institutions. Lee considers that investors feel they could affect their reputation if they enter the crypto space considering there are no regulatory protections for firms or investors.
Some countries decided to move forward and create self-regulatory agencies to improve industry standards.