AVAX jumped 12% recently, primarily driven by the rise of Bitcoin, inside of institutional treasury initiatives. Is AVAX more important to institutional portfolios now? The Avalanche Foundation has taken the lead in raising up to $1 billion with strategic partners including Hivemind Capitol and Dragonfly Capital to distribute treasury management solutions.
How important are treasury initiatives in reducing volatility?
The concentration and potential token ownership in long-term, institutional-grade portfolios is critical at easing volatility for crypto projects like AVAX. The Avalanche treasury initiative buys back tokens to reduce circulating supply, which creates both a scarcity and a base.
The institutional approach decreases speculative volatility and enhances liquidity while sending a signal of confidence to retail investors.
Is there enough regulatory clarity to entice institutional investment?
While the clarity of regulations has not been perfect, U.S regulators have provided clearer guides for banks and financial institutions to engage in various crypto activities without seeking regulatory approvals as long as risks are managed.
However, the landscape is still quite fragmented from federal to state, which complicates compliance for institutions engaged in multi-state operations.
Can AVAX keep growing with decentralization?
AVAX's price increase depends on maintaining decentralization as it expands. Avalanche's architecture is built with its multiple chains and over 1,200 validators. While concerns about the concentration of validator power and the influence of Ava Labs still exist.
The increased DeFi and enterprise development helps drive growth without compromising decentralized ideals.
What can fintech start-ups do to tackle risks?
Fintech start-ups that are looking to combine institutional treasury solutions can take some essential steps in managing the risks.
- Create the right collaboration and risk strategy.
- Reinforce governance to ensure accountability.
- Deploy a diversified asset allocation to enhance returns while maintaining liquidity.
- Leverage automation and digital tools to reduce manual errors.
- Incorporate RegTech to align compliance with strategic decisions.
- Implement cybersecurity measures.
- Prepare for operational risks and contingencies.
- Factor in advanced analytics and AI, but proceed cautiously.
