Nasdaq building tool to help institutional investors predict cryptocurrency prices
Institutional investors might get an analytical edge when trading cryptocurrencies if Nasdaq outs a tool to help them predict price movements of cryptocurrency assets. Analytics Hub, which launched last year, utilizes machine learning and natural language processing (NPL) capabilities to collect information and data from a wide range of sources in order to predict prices of cryptocurrencies.
The tool will, reportedly provide data for some 500 crypto assets and will consider the flow of funds through wallets, data from cryptocurrency exchanges and data from social media. For instance, it will collect data from Twitter and might later include StockTwits and then Reddit.
Although it has been dealing with traditional assets but is now planning to add price predictions for cryptocurrencies, in another move by Nasdaq to make crypto more palatable for institutional investors.
Surprisingly, the reason given by Nasdaq for the possibility of adding this type of dataset is "abundance of interest" according to the head of alternative data at the company, Bill Dague. This is even as crypto markets continued to fall. Although he said the company was exploring the product and added that whether it will be launched or not "remains to be seen," another official at the company said that they were beta testing the new crypto functionality prior to a November launch.
If it is successfully launched, it would compete with Thomson Reuter's cryptocurrency market data platform, the only large-scale financial platform that provides market data to investors. Eikon, which is similar to Nasdaq’s Analytics Hub integrated cryptocurrencies in partnership with CryptoCompare.
The news by Nasdaq comes as Citigroup this week launched a crypto custodian solution through digital asset receipts (DARs). It is hoped to assist large-scale investors to securely invest in cryptocurrencies with insurance and protection.
It is expected that the provision of dependable market data and analytics tools will combine with custody services to boost institutional investor participation.
One effect of continued data provision in the markets is the reduction in differences in price between crypto exchanges. Also, more cryptocurrency exchanges are now offering advanced connections to trading platforms (FIX) to support high-frequency trading (HFT) firms. This is slowly refining the markets and supporting a wide range of traders.
However, the benefits of increased institutional adoption for the last couple of months remained to be seen for many holders as the market continued to lose in market capitalization and prices remained depressed for most cryptocurrencies.
It is hoped that increased institutional investments may act to support and boost price surges in the future. Analysts also expect that entry of regulated financial firms to the crypto markets would boost institutional demand and stabilize markets. So far, many banks and regulated financial institutions have had an overly cautious approach towards cryptocurrency markets.