Discover how institutional investors use TWAP and VWAP to strategically hide their purchases of cryptocurrencies. Learn about the covert tactics used by large investors to get ahead in the crypto market. This insider information is a must-watch for anyone interested in cryptocurrency investing.
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00:00Investment banks and institutions are already in the market in a major way when it comes to digital assets.
00:07And today, we're going to get into the strategies that allow them to do that.
00:12I hear people speculate that we're going to see institutions move in in a large way.
00:16We're going to have this huge run-up in price when they all pile in on Bitcoin or Ethereum or XRP or, you know, whatever the token is that people are all hyped up about.
00:28But the reality of the situation is institutions are already in the market.
00:33They have OTC desks and brokers.
00:36And there are a couple different strategies that they already use on a regular basis to buy huge orders of digital assets without really impacting price in a major way.
00:48So the two main strategies that institutions use through OTC desks are going to be TWAP, which is a time-weighted average price.
00:58And the other one is a VWAP, which is a volume-weighted average price.
01:03So both of these are effective in basically averaging into the market over a certain time frame.
01:10So you might have, let's say you had $50 million, $100 million, whatever it might be,
01:16and you wanted to average into the market over a week or over a month.
01:21Well, you'll get an average price over that period dependent on, you know, again, if it's just over the time frame, whatever the time frame is, the average price over that period.
01:32Or you can be a little bit better and beat the average price if you do a volume-weighted average.
01:39So then the algorithm will time the buys to trade within a specific band.
01:44That way, when you're looking to, you know, execute sell orders over that period, you're going to get the best price without having, you know, significant drops in the market.
01:53And then same thing for buy orders, you know, when the price dips to a certain level, that's when they're going to be executing the orders.
02:00And if you had a big buy right there, it would push price up, right?
02:03So there's timing, and there's also, like, small allotments that they come in and purchase with to meet the order books and where they're at so that you don't have those big swings.
02:14And what that does is it lowers fees, keeps, and you get the best price over whatever the period was.
02:23So that's how institutions have moved into the market in a big way.
02:29And by using an OTC desk, and there's multiple of them, you know, we partner with Uphold in that capacity.
02:37Kraken has them.
02:38You've got other OTC desks that exist, Fidelity.
02:41Some of the institutions have their own that they purchased through.
02:46But this gives them the privacy, and it doesn't, you know, it's not on people's direct radar immediately.
02:54Eventually, you'll figure out that there has been some buys in the market.
02:57Price will move up over time if they are executing these types of things over an extended period of time.
03:04And then you'll also have, you know, a downtrend if people are continually liquidating large amounts.
03:08But there won't be big, big drops.
03:11When you see large liquidations in the market, if you're involved in that and you are trading it, you could have significant slippage.
03:21And there's not enough liquidity for you to execute trades.
03:25That's another reason you might want to partner with brokers.
03:27Brokers might use multiple OTC desks in order to execute buy orders all at the same time or at different times so that you can average yourself in and out of the market without dealing with the consequences that, you know, like just throwing it up on Coinbase and buying or selling a million or a couple million dollars worth is going to have on the market.
03:50If you think institutions aren't in the market yet in a really meaningful way, you would be mistaken.
03:57You know, we've seen BlackRock aggregate a pretty significant position in Bitcoin.
04:01While the price really hasn't had a ton of volatility, but institutions are here, they're in the market in a major way, they have sophisticated tools and strategies for entering the market without moving price to where the average retail investor is going to be aware of it.
04:19So, if you have a large amount of fiat, or if you have a large amount of crypto that you want to move in or out of the market, we have partners that can help you facilitate that at Digital Ascension Group.
04:33We obviously provide custodial services as well.
04:37So, you know, we'd love to have a conversation with you if that's something you're interested in.
04:41Hopefully this has been valuable for you.
04:43Please like, subscribe, and we'll see you on the next one.
04:49We'll see you on the next one.