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Institutional Investors Are Using Back Door for Crypto Purchases

Institutional investors are becoming more involved in the $220 billion cryptocurrency market than many observers may realize.

Buyers such as hedge funds have replaced high-net-worth individuals as the biggest buyers of large swaths of digital coins worth more than $100,000 through private transactions, according to Bobby Cho, global head of trading at Cumberland, the Chicago-based cryptocurrency trading unit of DRW Holdings LLC, which handles the over-the-counter purchases.

“Wait until institutional investors embrace crypto” has long been the rallying cry for digital-currency enthusiasts as prices surged and collapsed in the past year amid shifting expectations for regulatory acceptance of the asset class.

Meanwhile, the big sellers -- miners, whose computers generate coins by confirming transactions -- have begun scheduling regular coin sales instead of holding or waiting to offload them during market rallies. Many of the largest miners have also set up their own liquidity desks and operations.

“What that’s showing you is the professionalization that’s happening across the board in this space,” Cho said. “The Wild West days of crypto are really turning the corner.”

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