The perspective of traditional funds on the cryptocurrency market is actually highly counterintuitive to cryptocurrency. There are five perspective differences that need to be absorbed and accepted as soon as possible, one by one. 1. Compliance is greater than expected. The compliance mentioned earlier is a relatively easy to understand investment rule for encryption, From the perspective of traditional institutions, cryptocurrency is first and foremost an asset that must be forcefully embedded into the existing framework of traditional financial systems. Before discussing whether it can make money, traditional funds must make some investable judgments, which are quite restrictive. You can refer to the Chartered Institute of Alternative Investment Analysts for more information The article by CAIA has four prefaces in total: The first one is custody, where the funds should be placed, where they will be placed, and whether it is safe. The second is compliance, whether these funds violate the law or gray. The third one is operational risk, whether there will be any problems in the process of trading and fund storage, which is why the more top crypto builders dislike FTX's behavior. The last one is the determination of the amount of funds, that is, whether your asset or product is qualified to accommodate the institution's billions of funds. The focus of the materials provided by the world's top hedge fund, Insemann Group, to institutional investors is also on two aspects: volatility and correlation, and custody and regulatory considerations. 2. Price fluctuations can trigger risk control measures for traditional institutions. Utilizing volatility may be the best anti crypto intuition trading technique to utilize. Can you explain why this is more practical than compliance, Traditional institutions smash or sell because their rigid risk control rules require them to sell, not because they feel that encryption has lost its prospects. There is a commonly used quantitative risk control model for institutions, which is the volatility target: When the market is experiencing low volatility, the model will automatically increase leverage and positions; Once the market starts to fluctuate violently, the model will blindly force a reduction in positions and minimize risk exposure. In addition to similar information mentioned in the materials of the Insemann Group, AQR Capital has a risk parity white paper for self managed funds, which states that when the volatility of an asset suddenly surges, the system will automatically reduce its position in that asset, and vice versa, it will only increase its position when the volatility decreases. Cryptocurrency retail investors see high volatility as an opportunity, but in the eyes of traditional institutions, it is a different situation. For example, the sharp rise and fall of the counterfeit market will definitely deter traditional large funds. 3. The regulatory red line will lock in the purchasing limit of traditional institutions. If you are interested in the upper limit of institutional purchases, you can learn about the Basel Committee. Traditional financial rules set extremely strict limits on the risk exposure of banks holding cryptocurrency assets, which means that even if they are bullish on BTC, they can only be maintained below a certain percentage at most. The recovery and expansion of the crypto asset custody business in the US banking system after 23 years was due to regulatory authorities relaxing thresholds, rather than institutions suddenly taking over the development of the crypto industry, which led to a large amount of capital and funds misjudging VC projects in 24 years. It can be said that this is a counter intuition that led to the bankruptcy of a large number of market makers and institutions, but unfortunately it was a belated realization. 4. Narrative differences between old and new. This is easier to understand. In the eyes of cryptocurrency investors, BTC and ETH are old narratives, while in the eyes of traditional institutions, they are new narratives. No one would immediately bet their funds on niche tracks, as learning requires speed and time costs, known as deterministic costs. Some institutions have mentioned the distinction between BTC and ETH. Bitcoin is relatively less sensitive to regulation and has a clear positioning. ETH actually relies heavily on clear legal definitions of its legal attributes by national and regional jurisdictions, and may also be more likely to be replaced. 5. Traditional institutions have occupational risks, which are completely opposite to the risks of starting a community through encryption. Keynes saw through this very well, that is, in order to protect his reputation, he would rather follow the crowd and lose money in a conventional way than take a gamble to pursue unconventional success. Some American stock bloggers refer to it as broad institutional behavior, or more simply, a herd mentality and self-protection behavior under risk: If a fund manager buys Bitcoin and loses money, he can explain to his boss and clients that this is a macro market fluctuation; But if he buys a coin with a strange name, such as a local dog coin or a zero imitation, he will directly lose his job. However, hunters in the cryptocurrency industry prefer to search for more extreme alphas, with 10x 100x being a reasonable expectation. As long as it is early enough, even if the token eventually returns to zero, there will always be a certain profit window and there will be no so-called professional risk. Of course, if you often read traditional institutional research reports or policy revisions, you will find that the above is the general consensus in the current mainstream financial circle. Perhaps the era of chaos in the field of encryption has come to an end.