Thoughts

There Is Always Money on the Sidelines

Institutional money fuels bull markets, it never slays bear markets.

| 1 min

During the past 20 years, I’ve lived and traded through a few bear markets. On all occasions, I’ve heard the following sentence uttered in different variations: “there’s money on the sidelines waiting to get in”.

  • 2000: “There’s money on the sidelines waiting to buy tech stocks”.
  • 2007: “There’s a ton of money on the sidelines waiting to buy subprime residential mortgage-backed securities”.
  • 2018: “Institutional money will get into crypto any time now”.

The argument has merit. Sophisticated investors deploy cash to end corrections and restore the major trend. However, the argument only has merit as long as the trend is intact.

Don’t get me wrong, I really hope institutional investors will start buying meaningful amounts of crypto as soon as possible. But, these players are endowments, pension funds, and family offices tasked with preserving capital for the long haul. They are not fly by the seat of your pants traders willing to catch falling knives—especially not in a brand new asset class that many still consider a fraud.

The institutional money will come, but it will most likely come after the bear market ends.

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