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All year we’ve heard from the cryptocurrency bulls that major institutional investors are right around the corner. Well, they have watching this whole time, but we found out this year that the extensive established network of cryptocurrency investors is definitely growing. One of the world’s largest and most prestigious universities, Yale University, has two cryptocurrency funds funded by its endowments, a recent report revealed.
“One of the Largest Investments of Its Kind”
An anonymous source today told Bloomberg that the Ivy League has formally invested in Paradigm, a cryptocurrency fund which was founded by Fred Ehrsam, the co-founder of Coinbase. A total of $400 million has been raised in the fund to invest in cryptocurrencies which makes it amongst the highest in the space, alongside other giants such as Polychain Capital and investor Andreesen Horowitz.
Simply put, Paradigm is not taking any chances with this crypto winter. They plan to keep investing consistently over time, and if this so-called “crypto-winter” continues, then they will see it as an ample opportunity to keep buying more.
Currently, Yale’s endowment is the second-highest out of any university in the United States, standing at some $29.4 billion. A majority of these assets consist of investments, and it seems a greater proportion of them might be flowing into the cryptocurrency space in the coming years. According to Yale Daily News, the university has returned 7.4 percent every year on their endowment on average, but they are looking to further boost their coffers with this new cryptocurrency fund.
A New Wave
It wasn’t so long ago that people began suggesting that academic institutions might be getting into the cryptocurrency space. Not only did major institutions have large endowments they wanted returns on, but the current bearish downtrend has been met with vicious buying by some institutions who are adamant to call the bottom. John Lore, the founder of Capital Fund Law Group, suggested earlier this year that such a possibility was on the horizon, but was not able to name names.
It seems that with this report, we got some names: Yale University. However, the endowment-based cryptocurrency fund has not been confirmed publicly by the university. Some have speculated that Yale’s move into investing in the cryptocurrency space could signal a green light for other major educational institutions to do the same. Frankly, we are in a bear market — so buyers are more enticed.
However, the main hurdle for institutional investors, educational or otherwise, has been custodial services which are still not up to par with traditional finance. Yale University has outsourced this concern to Paradigm, but many other banks and established financial giants find themselves still waiting for a proper custodial service. Gemini and Coinbase have taken up the effort, but so far nothing seems quite certain. Billionaire trader Mike Novogratz has said that the “the herd is coming” for bullish sentiments in the cryptocurrency space, but that it will be fueled on a different basis from the rally of 2017: whereas the 2017 rally was fueled by enthusiasm, the next one will be fueled by institutions, he says.
A Strong End to 2018?
Although the cryptocurrency space has seen a bearish market winter this entire year, the buy signals from institutional investors such as Yale, the tripling rise of OTC institutional buyers, and the growing legal compliance of the entire space, all point toward a strong close to 2018.
Ultimately, it will require existing cryptocurrency companies to establish the ease of doing business to be as simple as traditional finance. Naturally, this is a hard task given that the space is so drastically different from what institutional banks and firms usually expect. However, with the development of proven custodial services, legal compliance across the board, and high amounts of liquidity, we can begin to see a new beginning for the cryptocurrency space. If Novogratz is right, then these will be ultimately the preconditions for the next rally.
The recent news about Yale’s cryptocurrency fund is yet another indicator that the institutional money is slowly pouring in. Most importantly, however, it gives many other educational institutions the excuse to invest themselves. Yale has been the first, but it is one of the most important universities in the United States with longstanding connections to the established financial class. Therefore, it is likely that other major academic endowments are looking at Yale’s investment with curiosity.
If there’s a takeaway to this bombshell report, it’s that there’s interest in the cryptocurrency space beyond just traditional finance: it’s coming in from all sectors of the economy which is just starting to warm up to the idea that cryptocurrencies are here to stay.