The expected flow of institutional capital into the crypto market has been a popular story in recent years, but often with limited traction. Now, in the wake of the 2020 macro backdrop, it’s really happening. Preparations have been made for institutional involvement and enterprise-level solutions have been built for crypto custody, digital asset management and trade execution brokerage.
Because the crypto market recently hit $ 1 trillion for the first time and beyond projections to make that fivefoldit is more important than ever that there are institutional quality rails to capture this critical mass. Some of the projects at the forefront of that task are at the forefront of the institutional flow of money that will benefit the entire space.
The Digital Currency Group subsidiary Grayscale Investments has been involved in the space longer than most. The GBTC Bitcoin Trust The early adopters offerings were once one of the few institutional products for the legacy market, debuting in 2013. The customer base now has over 20 settings with investments of more than $ 100 million, including Ark Invest and Rothschild Investment Corporation, and it hit recently $ 20 billion in assets under management in its latest milestone.
Until Grayscale is facing more competition in this area, perhaps in the form of a bitcoin ETF approval this year, growth is likely to continue to grow rapidly. It offers institutional-quality regulated investment products for a range of individual digital assets, including bitcoin, ethereum and litecoin, as well as cryptocurrency baskets such as the large-cap fund.
Finxflo is the first hybrid liquidity aggregator to go a step further than Tagomi’s solution. It collects cefi and DeFi locations through one regulated platform, one KYC process and one wallet, without the need to open multiple accounts. The enterprise-level tools offer the best of both worlds, providing users with a liquidity sponge to trade at the best prices through more than 25 exchanges and liquidity providers with minimal slippage, reduced risk and zero withdrawal fees. It provides the required institutional protection against front running and an optimal price without restrictions on the liquidity supply.
Finxflo also provides institutional-grade insured custody storage in partnership with leading provider Fireblocks, ensuring customer funds are kept in encrypted, segregated vaults with access to insurance.
By adding even more utility, the Finxflo ecosystem is fed by the native FXF token, a blockchain 3.0 asset that allows users to access all of Finxflo’s additional features, including stakeout, board rights and reduced trading fees. It also opens up the world of DeFi protocols and cross-chain interoperability between the Ethereum and Tron ecosystems, introducing users to provide agricultural liquidity provision and arbitrage capabilities. With a private sale already sold out, FXF will be launching on Polkastarter, DEX and CEX in the coming weeks.
Tagomi, acquired by Coinbase last year, is a leading crypto prime brokerage platform offering trading, custody, margin, lending, shorting, staking and financing in one account. Tagomi offers access to more than 14 exchange and liquidity locations, allowing users to effortlessly combine balances in different accounts while accessing the best price execution, and advanced trading tools for institutional investors to separate trading strategies.
Tagomi has already become the platform of choice for several well-known hedge funds and family offices, including Paradigm, Pantera and Bitwise. Bringing in expertise from legacy financial institutions such as Goldman Sachs, Citadel and KCG, it is building the foundation for the next wave of institutional investors.
Fidelity Digital Assets
Fidelity Investments, one of the largest financial services companies in the world with $ 3.3 trillion in assets under management, launched Fidelity Digital Assets, to bridge the gap between legacy finance and the crypto market. The new crypto division offers a full enterprise-level service platform for secure custody, transaction execution and investment services. More recently it launched one bitcoin fund for qualified investors made available through family offices, registered investment advisers and other institutions.
Fidelity’s survey of institutional investors, 80% of respondents highlighted that something appealing about crypto as an asset class, demonstrating the pent-up demand potential of the space, provided solutions such as Fidelity Digital Assets can deliver the viable product-market fit that is required.
The Intercontinental Exchange (ICE), which operates the New York Stock Exchange (NYSE), has established a new company, Bakes, in partnership with Microsoft, leveraging its cloud solutions to enable consumers to buy, sell, store, and spend cryptocurrencies on a global network. Bakkt provides a range of digital asset services including a dedicated wallet and application, secure custody and transaction execution. It also offers bitcoin futures and options in a challenge to derivative products from the legacy provider Chicago Mercantile Exchange (CME), although they are settled in bitcoin rather than cash.
Building on the initial success, Bakkt goes public through a merger with a special acquisition company (SPAC), VPC Impact Acquisition Holdings (VIH). The deal is valued at $ 2.1 billion and is expected to close in the second quarter, providing a vital investment to capitalize on the growing institutional demand in the space. This follows a similar announcement from the cryptocurrency platform Coinbase and offers greater adoption for the digital asset market.
The institutional cycle
Central bank money printing is in overdrive, especially in the US with M1 supply including bank deposits on current accounts and physical currency, no less than 70% year-on-year.
Understandably, institutional players are increasingly concerned about the prospect of inflation, one of the key drivers of increasing interest in a crypto industry that can be protected from it in 2020.
This potential gateway use case opens up settings for further use in space, enabling significant adoption in this coming cycle. The projects at the forefront of this are building the infrastructure that institutions need to fulfill that role.