In the world of crypto, we often hear about the Wall Street, institutional investors, hedge funds, and typically financial institutions that have a great influence on the cryptocurrency market. But most of us in this field do not have a background in finance and were first exposed to crypto because of NFTs, play-to-earn that we can quickly access compared to stocks and financial instruments that we have no idea about.
So here we will explain the typical financial institutions, not only in the traditional asset class but also in crypto. So let's start with:
1.
Wall Street: This is a term that is often used in the world of finance and investment in the US. He is based in Manhattan, New York. This is the financial district where financial entities such as investment banks, stock exchanges, and brokerage firms are located.
This institution plays a major role in global finance by underwriting new stock offerings and facilitating mergers and acquisitions. And in providing brokerage services for trading security, As the crypto market has matured, many Wall Street firms are incorporating crypto and bitcoin into their portfolios. Just like offering services in futures trading, custody, and products related to crypto, the most recent here is the Bitcoin spot Etf.
So when it is said Wall Street, it is not just a firm, but rather its scope is wide.
2.
Hedge Fund: You often hear this on social media. This is a firm that has a collection of money from investors, typically wealthy investors who invest in hedge funds. And it is only available to accredited investors; these are the only investors who meet the specific income requirements and who are qualified to invest in securities that are not registered with financial authority. That is why it is not available to retail investors.
And according to my research, the requirements for an individual to become an accredited investor are that they must have a network that exceeds 1 million dollars in the US, and that does not include the value of their primary residence. And what the hedge fund does with this money is that they invest in a wide range of assets because their goal is to get the highest return possible for their investors.
And it is managed by professional managers; they are the ones who trade and invest to increase the value of the fund. But it is not like traditional fund managers, who are only allowed to invest in stocks or bonds. With hedge funds, they are free to invest anywhere, including land, real estate, stock derivatives, and even cryptocurrency or bitcoin.
Therefore, the goal of the hedge fund is to get a significant investment return. Normally, the managers receive fees, usually 2% of the asset funds. And they still have a performance fee of around 20% of any profit. That's why the managers are performing well because they have a lot of income from the fund. And those who are known to have funds with image below, they also participate in the derivative market and they are also its opponent on the other side of the trade.
3.
Venture capital: these are the ones that specialize in financial entities, in companies that are just starting that they think have potential or market impact but also high risk. There are also many venture firms in new crypto projects, and these are the first supporters of the project and are not like traditional investors who just buy company stocks and sell when the value increases. This is also what helps the project rise, and sometimes they provide strategic advice and are appointed by board members to the project, and sometimes they also provide marketing so that the project can be listed immediately on the big exchanges. So they don't just fund the project; they also support it until the valuation of the crypto project increases.
Actually, it plays a crucial role in a crypto project in order to provide funds to innovators so that the crypto project can achieve its goal. And in return, this is where the venture capitalist firms will make money.
4.
Mutual Fund: This is also an investment vehicle that gives full money to multiple investors, and this fund is used to buy diversified portfolios of stocks, bonds, or other securities. It gives individual investors access to various financial instruments. And if they do, it won't be easy either, to be honest. There are also fund managers here who allocate funds to various assets, and normally the strategy they follow here is diversification.
There are different types of mutual funds, such as:
Equity funds are the type that invest primarily in stocks with the goal of earning faster compared to the money market and are a bit high-risk on the mutual fund side.
Bond/Fix Funds are the money invested in bonds and other debt instruments that are generally less risky than equity funds. but the return here is also lower.
The index fund replicates the performance of a specific index, like the SMP500, which has the same holdings in stocks that have the same proportion in the index.
So, overall, the mutual fund is lower risk compared to the hedge fund because most of the time they diversify the portfolio, unlike the hedge fund, which focuses on leverage and derivatives because they are aiming for a higher return. And there are also mutual funds that invest in crypto but only focus on large market caps like Bitcoin, Ethereum, and Litecoin. And they only put a small percentage of the portfolio in it.
5.
ETF(Exchange Traded Fund): this is the investment fund traded on the stock exchange, such as stocks, commodities, cryptocurrency, or Bitcoin. It's just like an index fund. For example, in the Bitcoin spot ETF, the ETF that is tradable on the stock exchange tracks the value of bitcoin in the spot market. And it is available to any investor who participates in the stock market.
When an investor buys an ETF, the actual asset does not belong to them; instead, it belongs to the company that offers it. The difference between a mutual fund and a hedge fund is that their structure is passively managed, which is cheaper because there are no active fund managers that investors have to pay. So they prefer to invest in ETFs because they are cheaper here.
So I hope this adds knowledge to any of us in the community here on this forum. Have a good day, everyone. 
