Ari Paul, the co-founder of crypto investment firm BlockTower Capital, says bitcoin adoption is at a standstill because Wall Street is taking a “wait-and-see” approach amid the bear market.

In a lengthy tweetstorm, Paul says institutional viewpoints about cryptocurrencies fall into three categories:

Venture capital mindset: Is there value creation we can capture with early-stage investment? Passive bitcoin or index exposure: Is this going to be digital gold or a portfolio hedge? Is this a market where we can generate profits as service providers or through active trading?

Institutions Are In ‘Wait-and-See’ Mode

Paul says the three viewpoints are not mutually exclusive, and that each has its respective obstacles and catalysts to drive adoption. However, many investors are in a holding pattern due to regulatory uncertainty amid the protracted market slump.

This mirrors the sentiment expressed by Dan Morehead, the CEO of bitcoin investment firm Pantera Capital. Morehead believes that institutional investors will eventually start wading in crypto en masse once the bitcoin price recovers. But it won’t happen before then, he says.

For his part, Ari Paul says the lack of regulatory clarity — combined with a dearth of success cases about real-user bitcoin adoption — have had a chilling effect on the industry.

2/ there’s kind of three basic views of crypto by institutions: a. VC mindset – is there value creation we can capture with early stage investment? b. Passive Bitcoin or index exposure – is this going to be digital gold or a portfolio hedge? — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

4/ the 3 views each have different obstacles and potential catalysts to drive adoption. Many investors in “wait and see” more for all 3 views. — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

For those who view crypto as a hedge, Paul says investors want “statistical evidence” of its ability to hedge fiat money along with a “pretty-looking chart” to support this claim.

6/ for b. Crypto as money or hedge, they want to see a pretty looking chart or at least consolidation, and stronger network effects (waiting on other institutions.). Also want statistical evidence of it hedging fiat. — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

Lack of Regulatory Clarity Is a Problem

Paul says the lack of regulatory clarity surrounding bitcoin custodianship, anti-money-laundering (AML), and know-your-customer (KYC) practices have caused confusion.

8/ as an example on regulatory clarity side, we all know BTC is totally legal, but the rules around being a custodian of Bitcoin and how to handle things like hard forks still unclear. AML/KYC requirements still murky for service providers. — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

Paul concedes that there’s escalating mainstream interest in cryptocurrencies, but the herd mentality of institutions has caused a “follow-the-leader” bottleneck. In other words, everyone’s waiting for someone else to take the plunge before they act.

10/ these things almost always follow a hockey stick kind of chart. Lots of slow building of a base of understanding and institutional buy-in, then a sharp “follow the leader” effect. — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

Institutional Investments Won’t Happen Until Q3?

Accordingly, Paul says he may have overstated the timeline for institutional investments into crypto. Now he says it may not happen until the third quarter of 2019 at the earliest.

“I’ve been too optimistic about the pace of institutional adoption in the past,” Paul writes. “It’s coming, but I can’t estimate which quarter (Whether that’s this year or 2022) that we’ll see a big spike. As a humble guess, something like Q3 2019.”

11/ I’ve been too optimistic about the pace of institutional adoption in the past. It’s coming, but I can’t estimate which quarter (Whether that’s this year or 2022) that we’ll see a big spike. As a humble guess, something like q3 2019. — Ari Paul ⛓️ (@AriDavidPaul) February 1, 2019

Crypto Market Banks On Institutional Investors

As CCN.com reported, the crypto market is banking on a wave of institutional investments to take the industry to the next level.

Many observers had expected the influx in late-2018. However, that got derailed by the unexpectedly long crypto bear market. Institutions got scared off by the protracted downturn, according to JPMorgan Chase analyst Nikolaos Panigirtzoglou.

Jeremy Allaire: Crypto Is Fundamental to Future

As bearish sentiment dominates the market, crypto’s “true believers” like Circle CEO Jeremy Allaire remain undeterred by the FUD. Allaire says bitcoin skeptics are that way because they’re unfamiliar with the new technology.

“People throw around ‘crypto’ like it’s a bad thing — it’s scary,” Allaire said in January 2019. “Guess what? Cryptography is at the foundation of protecting modern society, human privacy. It’s a fundamental tool of our cyber defenses. It’s a fundamental tool of every corporation.”

Humanity Can’t Survive Digital Age Without Crypto: Circle CEO Jeremy Allaire https://t.co/A9ImFDflVu — CCN.com (@CCNMarkets) January 24, 2019

Allaire underscored that modern society relies heavily on digital infrastructure. Accordingly, humanity won’t be able to survive the digital age without digital currencies.

“Crypto is fundamental to the future,” Allaire says. “We need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.”

Allaire added: “We see this as much more transformative even than the web. We think this has a long arc that will have a far greater impact on our civic institutions and our economic institutions.”