Institutionalization will reduce the volatility of the largest cryptocurrencies, says executive

Source: Exame Original Title: Institutionalization will reduce volatility of major cryptocurrencies, says Binance executive Original Link: The growing institutionalization of the crypto market is expected to bring a series of changes, and one of them is the potential reduction in price volatility for the sector’s largest cryptocurrencies. That’s according to Catherine Chen, global head of institutional clients at a crypto trading platform, in an exclusive interview.

During Blockchain Week in Dubai, Chen highlighted the increasing participation of institutional investors in the crypto market, but noted that this movement naturally tends to be slow, considering the characteristics and behavior of this investor class.

Even so, the executive believes there is no turning back, and that the influence of traditional financial institutions in the cryptocurrency market will grow year by year, in a movement that is essential for the sector’s own growth.

An institutional future

Chen points out that the institutionalization of the crypto market is “happening exactly as we predicted.” She notes that the launch of investment products in the sector by large traditional companies, especially Bitcoin ETFs, has helped “legitimize this asset class.”

In practice, the new scenario “forces asset managers and banks to look at the sector again, to analyze it more carefully.” The executive acknowledges that this rapprochement between cryptocurrencies and the market “will never happen overnight; it’s a gradual process.” But the movement has already started.

“We are definitely seeing a gradual entry of institutional players, and it starts out small, because smaller institutions are more agile, have fewer restrictions. The larger ones do it in an appropriate, serious way, and in their own manner,” she comments.

The platform has been working to boost this movement, with an initial focus on smaller institutional players and independent agents. “As time goes by, we are seeing interest from large institutions, considering entering or already entering the crypto market.”

In the case of larger institutions, greater availability of resources and technology does not completely remove the need to seek services from specialized brokers, since the infrastructure required to invest in crypto tends to be “completely different.” “That’s why it still makes sense to have a partnership to have a reliable, tested platform.”

Chen also sees an important step for the sector with the advancement of U.S. regulation, symbolized by this year’s approval of the Genius Act, specific regulation for stablecoins. The law “confirms that it’s not possible to avoid or just wait for the sector to grow. And this applies to regulators as well. People look up to the United States a lot.”

“With more clarity and direction, it definitely helps boost the industry’s growth and ensure it. Regulators, companies, and independent agents are thinking more seriously because they do not want to miss the train,” she says.

The executive also believes that this movement “is not just the attitude of one government, but rather a growing adoption and the rise of crypto use cases. That’s the case for stablecoins, and jurisdictions around the world are really integrating crypto into daily life. Crypto brings greater efficiency to the financial system, improving people’s lives.”

For Chen, this movement is likely to have profound impacts on the market, including on asset prices. Although this trend may not affect all cryptocurrencies, she notes that “we are seeing a growth in institutional investments in the main cryptos, such as bitcoin, ether, and other large-cap coins, and that institutional money tends to be more long-lasting. When an investor decides to allocate, that investment tends to last, because the decision-making process itself takes longer.”

“Because of that, these investors are less likely to be moving in and out. As this share continues to rise, there could be a drop in price volatility. It’s a maturation of the asset class, and the major ones will probably experience reduced volatility. That’s a positive thing,” she says.

As for the reasons behind institutional investment in bitcoin, the executive believes the movement is being influenced by the asset’s potential to serve as “digital gold.”

“If you talk to the more conscious institutional investors about allocation, they consider that the reason for this allocation is that it is the fastest-growing asset, the ETF that has grown much more. It has grown more than gold, the most obvious comparison, and bitcoin is digital. These are undeniable things. So this is already a central consideration for investors,” she states.