Bitcoin prices, despite a major breach at the Binance crypto exchange, have surged 9.3% in the past few days, now hovering at $6,166. What is pushing BTC past what most thought was an impenetrable barrier, the $6,000 level? Bloomberg announced the news: “Fidelity, one of the world’s largest investment firms with almost $7 billion customer assets, will reportedly launch a cryptocurrency trading platform “within weeks.” The bitcoin trading service is aimed at institutional investors and will come complete with high-grade custody.” Fidelity also touts a customer base in excess of 30 million.
As we reported in March:
While the crypto community eagerly anticipates the participation of institutional heavyweights in 2019, Fidelity’s new cryptocurrency company has actually been active, silently surveying, educating, and steadily adding interested institutional investor clients, comprised at this point primarily of hedge funds and family offices.
According to Tom Jessop, the head of Fidelity Digital Assets:
There’s long-term interest from institutional investors to add some form of cryptocurrency to their portfolios. It’s often seen as an uncorrelated risk, or a store of value in a crisis. Others see a trading opportunity given the sector’s volatility.
When Jessop had his staff survey their institutional investors on various crypto matters, he found out, to his surprise, that 22% of the respondents already had investments in cryptocurrencies. This fact is not that surprising when you realize that only $2.5 trillion of their asset base are under management. The other $4.5 trillion relates to custodial arrangements, where they facilitate market access for independently managed pension, commingled, and hedge funds.
Retail customers dominate crypto trading today, but the environment will definitely change and adapt soon, as in “within weeks”, as Fidelity “will shift the spectrum to “big money” institutions”. Other surveys suggest that nearly 70% of “big money” plan to invest in the crypto sector in coming years, but many are still fearful.
As was reported: “Institutional traders have been notoriously wary of bitcoin thanks to a decade of negative preconceptions. Just this week, bitcoin has been slammed as “gambling device” by famed investor Warren Buffett. And Nobel laureate Joseph Stiglitz called for cryptocurrencies to be shut down”. There will always be a subset of cynics that will never appreciate the potential for digital assets, but they are a minority.
Fidelity has already launched its digital asset custodial services. Several institutions have always feared the lack of secure custodial arrangements in the crypto exchange network, but now Fidelity will offer this custodial business, along with its new crypto trading platform. There have been few details released about this platform, but the general feeling among advocates is that:
You couple that custody with the new trading and it seems like they’re really putting a suite of products here together to ease people into this market.
Jessop and his team have already on-boarded five major clients. They understand that interest is present, but participation will depend greatly on awareness:
They’ve approached us wanting to learn, which is an encouraging sign. That’s not to say that there’s a cohort of people that once they get educated will still have a negative view.
We suspect the launch will be staged, thereby implying that volumes will be controlled and allowed to grow gradually, as early “kinks” are corrected. At some point, over 30 million customers will be served, and the impact will not be small.