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Institutional Trading: Types of Investors and Tools

Today’s cryptocurrency market is so much different from what it was at its beginning. In its early years, Bitcoin was discussed solely among tech-savvy people and crypto enthusiasts, and no one could suppose that it could receive global adoption in the 2020s. The emergence of large-capital investors created the need for institutional crypto platforms. Let’s see what is an institutional trading platform and how it differs from retail exchanges.

What is Institutional Exchange? 

It is a platform providing institutional trading tools, different from what retail platforms may offer, for example:

  • Institutional exchanges offer IPOs and futures contracts that are only available for institutional traders.
  • Institutional traders have flexible conditions in terms of commissions and may have some agreed fee structures as market makers do.
  • Institutional platforms provide direct market access and algorithmic trading tools.
  • Institutional exchanges offer high-performance APIs for seamless integration with their trading systems and algorithmic strategies.
  • Improved risk management and reporting tools.

Who are Institutional Traders?

Hedge funds – acting on behalf of their clients, hedge funds are “free managers” who choose the assets to invest in and utilize complex institutional trading strategies that help them optimize their gains during different market phases. Hedge funds focus on hedging strategies and arbitrage. Ther clients are pension funds, companies, and investment firms.

Mutual and investment funds – funds that act on behalf of institutional and retail investors and invest their funds in a wide range of assets. A company is in charge of managing investments, which are agreed in the mutual fund contract. So in fact, such funds don’t have the freedom to pick assets like hedge funds do. Mutual funds don’t require large capital, so they are available for retail traders.

Pension funds – same as investment funds, with the difference that they manage money from the client’s pension savings to invest and gain returns. Pension funds can work with several pension plans following a managing entity, that decides where to invest and when. 

Investment banks – intermediaries that offer institutional trading desks and tools for their clients, conduct transactions such as IPOs and mergers and sometimes act as brokers.

Banks and financial institutions can act as liquidity providers. What is a crypto liquidity provider? In short, it is a company that cooperates with a crypto exchange and provides a pool of assets for other participants to buy or sell. This pool ensures that traders can fulfill their trades with no delays and price slippage.


Hedge funds, family offices, pension funds, and banks are the most active institutional traders in the crypto sector. By injecting large capital into crypto trading, they receive an expanded range of tools and flexible fee structures, as they largely contribute to the growth of the crypto market.


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