This first argument for my prediction is based on time. If you base the profit opportunity for hedge funds on volatility, and trading availability, then the cryptocurrency market has a vast advantage. Your average hedge funds, or private stock investing platform is open 40 hours a week. There is also delays for buying and selling shares in funds because of acquisition times. These sometimes stretch longer than one business week meaning the weekend will delay the acquisition even more. The cryptocurrency trading platforms will improve these conditions by multiple factors.
The cryptocurrency market is global and 24/7, meaning everyone on earth has access to it 168 hours a week, 420% more time than traditional stock markets have open. Just this factor will impact every single active institutional or private trader.
Technical analysis, Bot trading, algorithm trading, swing trading, all of these traditional investing strategies and evaluation tools is more efficient in the cryptocurrency market since they have more data to work on. At this point I know some people who analyse crypto price data, will be skeptical of my argument. This is because normal portfolio weight balancing methods like Modern portfolio theory, and the Markowitz portfolio optimization model, is lacking in profit capabilities when applied to cryptocurrency portfolios. My argument is based on the two principles that Blockchain's purchasing power, and transaction handling capabilities are measurable, and that pattern data recognition is assumed to be improved by more data price points.
If you assume that their strategic tools gives them an advantage over traditional buy/Hodler strategy, and that they can improve their odds of higher returns, then they should be able to better optimize their trading strategies on a platform with 420% more up time, right?
Looking at the more financial advantages they gain from trading cryptocurrency instead of stocks. First off, when trading traditional stocks, the orders come in onto the order book in a fair manner. Meaning they are placed in the order that they arrived. The downside of this when trading stocks is that the server hosting the order book is where the respective stock market is located. So for the New York Stock Exchange, or NYSE, which is the worlds biggest Stock exchange, the order book is therefore located on their server at Wall street.
This has resulted in property value skyrocketing, by measured proximity to Wall street and the NYSE. The prices have skyrocketed because of the gained nano-second which in large High frequency traders, trading bots, trading algorithms, etc, is enough to gain sufficient advantages to increase profit. On the future decentralized exchanges, the playing field will equalize, resulting in a lower entry barrier for trading at equal conditions, in a fair manner. This will promote smaller funds, and businesses to compete with the giants.
These decentralized exchanges will also be fee-less, meaning the possible returns for High Frequency traders will be much higher, this also applies for all other types of traders, including institutional and private. The nature of cryptocurrency with airdrops, hard forks, staking returns, etc. will provide daily compounded cash flow revenue streams for these institutions, which can promote a more performance based pricing model for funds since they can more easily cover operational expenses using the passive and constantly compounding returns from staking etc. This way they can reduce traditional fixed fee based pricing models, and motivate higher performance based fee structures based on annual earnings from the fund investors.
Making the assumption that the cryptocurrency market is bullish, and will for the foreseeable future continue that way, a performance based pricing model will allow for greater earnings for the fund managers, resulting in an increased market share gain that crypto-based funds will steal from traditional asset class funds. I expect this to create a self-fulfilling prophecy resulting in mass institutional adoption of Distributed Ledger Technology (Blockchain, tangle, etc.).
The sad but real truth is that the cryptocurrency market has currently no efficient exchange trading regulations in place. This means that market manipulators can reign free. For experienced hustler, and advanced trading bots, this is a prime opportunity for profit. Even if this affects private investors gains, and increases volatility in the market, the sheer fact that money can be made will further strengthen the network effect placed on valuation of cryptocurrencies and grow the reaches of this market to a wider audiance.
And when the trading of the other assets classes are moved to the Blockchain, and secured using smart contracts. This will further strengthen institutional and governmental acceptance and adoption of this technology. I believe this factor to be the one which will set in motion the biggest economic shift, and shift of global power, that this world has ever seen.