Institutional Investors Are Snatching Up XRP (CRYPTO: XRP) and Solana (SOL)

Of those institutional investors in the Coinbase survey, 57% said that greater regulatory clarity would be the next catalyst for growth within the digital assets industry

A survey of 352 institutional investors by Coinbase Global (NASDAQ:COIN) in January found that they were mostly upbeat about the prospects for further growth in digital assets.

What Happened: The survey, which covered asset management companies, hedge funds, private banks, and family offices, found that the majority of the investors controlled assets in excess of $1 billion, placing them among the larger players in the markets.

Of those institutional investors, 57% said that greater regulatory clarity would be the next catalyst for growth within the digital assets industry, according to the Coinbase survey.

The report suggests that new regulations are needed to define the terms of competition in the cryptocurrency industry, rather than a more piecemeal approach that merely seeks to prevent criminality using frameworks applied to other markets, like the stock market.

See Related: Best Cryptocurrency Scanners 2023

Why It’s Important: Both XRP (CRYPTO:XRP) and Solana (CRYPTO:SOL) are highly exposed to this regulatory catalyst, and the early signs suggest that things are playing out in favor of the two chains.

The Securities and Exchange Commission dropped its lawsuit against Ripple (NYSE:RVNL), the company that issues XRP, on March 19, causing the coin's price to rise substantially. The SEC had originally claimed that the business had issued XRP without filing the requisite paperwork for selling a registered security.

Dropping the case appears to confirm Ripple's argument that XRP is not a security, but there's probably still a bit more elaboration to come from regulators on the exact principles that matter on this front.

Several financial institutions have already requested permission from the SEC to issue exchange-traded funds holding the coins, and if those ETFs are approved, it would mark a significant shift that makes the two chains more accessible to capital in the traditional financial system. Other financial instruments, like ETFs holding financial derivatives of Solana or XRP, are also under consideration or already hitting the market.

Furthermore, as the SEC continues to provide the rules for competition within crypto as part of its new task force, launched in early March, the other legal ambiguities that might dissuade institutional investors today will continue to clear up.

Then, their capital will flow in with higher volume. When it does, prices will probably rise accordingly. And considering that many institutional investors have very long time horizons for their investments, those higher prices could easily stick around for the foreseeable future and beyond.

What Else: There's an international dimension to this story, too.

As the U.S. regulators go, so too will regulators in other countries, including in countries with a lot of capital like China, be making their preferred policies into explicit guidelines.

Many of those other groups of regulators will be slower to act than those in the U.S., which suggests that Solana and XRP could be exposed to more catalysts over the next few years.

That means it's broadly a favorable time to buy XRP, Solana, and perhaps other altcoins that are in wide distribution globally.

But investors should be aware that there might not ever be catalysts that are as powerful as these, especially from the perspective of attracting capital from institutional investors.

When an asset is officially sanctioned or allowed to trade under the law, there's no possibility of a future comparable event.

This is to say that if you're going to invest in Solana or XRP, don't procrastinate for a year if you want to capture some upside from regulators clarifying the rules of the industry.

Eventually, the main pillars of the new regulations will be in place, and at that point they will for the most part only have their (formidable) core growth drivers to rely on to reward holders.