Will Cryptocurrency Custody Services Fuel Institutional Demand?
These developer teams require custodians like Finoa in order to safely have custody of their remaining treasury assets in a regulated manner. This report focuses on the crypto institutional adoption of crypto from the perspective of Finoa as the leading crypto custodian in Europe. It provides a general overview of the news-worthy institutional investments over the past year and a categorization of use cases of such investments as we observe them. And it reminds me a little bit of the trust structure — we chose not to do a trust structure for Bitcoin access, just like we’re choosing, at the moment, not to engage with the futures product. That doesn’t mean that a company like Grayscale isn’t very important for the space when the market really needed something like that, just like the market needs a futures ETF right now. But I would call that more of a trading vehicle as opposed to an investor retail vehicle.
Germany-based venture capital firm Bitcoin Group SE brings up the rear of the list, with relatively modest holdings of 3,947 BTC, worth just over $86 million at today’s prices. In June 2021, the company was listed on the Nasdaq Global Select Market under the HUT ticker, with the company’s SEC filing noting that it’s “committed to growing shareholder value by increasing the number and value of our bitcoin holdings.” In March 2021, the company’s CFO Amrita Ahuja argued that “there’s absolutely a case for every balance sheet to have Bitcoin on it,” in an interview with Fortune, while reaffirming the company’s commitment to holding the cryptocurrency “for the long term.” At the time, the company described the investment as “part of Square’s ongoing commitment to bitcoin,” noting that “the company plans to assess its aggregate https://www.beaxy.com/exchange/btc-usd/</a investment in Bitcoin relative to its other investments on an ongoing basis." Bitcoin mining company Marathon Digital, unsurprisingly, is also a large holder of Bitcoin, with 10,055 BTC in its corporate treasury (worth around $218 million at current prices). The company, which aims to build "the largest Bitcoin mining operation in North America at one of the lowest energy costs," originated as a patent holding firm before its pivot into crypto mining. HSBC planned to move the settlement of $20B in assets onto a new blockchain-based custody platform. So far NFTs have often been used to represent pieces of digital art, but their real value could be the ability to securely prove provenance and characteristics of assets. Read more about price of bitcoins in usd here. For example of an asset that is non-fungible is a piece of land, as no two plots of land are identical.
The institutional gateway to digital asset investing
Founded by Michael Novogratz in January 2018, the company has partnered with crypto firms including Block.one and BlockFi. In April 2020, he noted that stimulus measures announced in response to the coronavirus pandemic were driving interest in cryptocurrencies, calling it Bitcoin’s “moment” and arguing that “money doesn’t grow on trees.” That taboo has been well and truly broken, with a number of major institutional investors buying up Bitcoin over the past two years. Since Coinbase Pro is mostly used by large investors, their average order size is significantly greater than the average order you see in a centralized exchange. To avoid unlikely volatility on the market, market makers inject more liquidity on the market prior to completing an order. The Connexus Cloud portfolio includes Connexus Extranet, Connexus Ethernet and Connexus WAN, as well as Connexus Voice services.
Blockchain has enabled the development of cryptocurrencies – which is where it has garnered all the headlines – but we believe it will also be a catalyst for fundamental change within asset management and financial services. A development that ran parallel to the cryptocurrency space in 2020 was the testing of China’s digital Yuan and the beginning of serious discussion around Central Bank Digital Currencies in Europe and the US. This category also includes early investors or miners of Bitcoin and other cryptocurrencies who have custodied their own stockpiles for years, but recently watched the value of their assets grow to such a degree that they seek professional custody services. The next major step forward in the crypto ETP landscape would be the long-waited approval of a Bitcoin ETF by the United States SEC. The Winklevoss twins filed their first application for such an ETF in 2013, which was rejected by the SEC in 2017. Many Bitcoin ETF applications have been made since then, only to receive similar rejections. (Currently, there are 8 applications with the SEC for a Bitcoin ETF.) Grayscale has also stated its desire to convert its products from trusts into ETFs, which would then become redeemable for the underlying assets and trade at a fairer price. Institutional investors wishing to purchase crypto via exchange-traded products will have to wait for a US ETF and make do with existing ETPs.
Businesses are also seeing increasing utility in branded coins, tokens and NFTs for loyalty programs, which, our survey shows, are broadly popular with consumers and merchants alike. However, most businesses are still keeping clear of directly accepting any form of crypto, including stablecoins, citing the biggest barrier to entry right now as regulatory uncertainty. More institutional adoption will only come with robust and interoperable regulatory frameworks — the good news is that these are rapidly approaching. A total of 37 crypto investment products launched in 2021, while investment products enjoyed inflows of $9.3 bn, compared with $6.8 bn in 2020, according to CoinShares. Bitcoin funds attracted $6.3 bn worth of capital, Ethereum products saw inflows totaling nearly $1.4 bn and multi-funds were also popular. During the year, Bitcoin reached a high of $70,000 but its percentage of total cryptocurrency market share dropped from 70 percent to 40 percent in favor of altcoins. At the same time, decentralized finance participation in crypto lending, derivatives and trading climbed to $110 bn in total value locked from $10 bn the year before.
Which crypto will survive long term?
Bitcoin (BTC) – Overall Best Long Term Crypto Investment
Bitcoin is by far the best long-term crypto investment. It is the pioneer cryptocurrency that though originally designed to replace fiat currencies has been widely adopted as a store of value and hedge against traditional investments.
At least 12 spot-market ETFs are currently awaiting SEC approval, providing even more widespread adoption and day-to-day crypto-price exposure for US investors. The main purpose of the treasury function is risk management and the preservation of capital. When deciding and executing on an investment in digital assets, governance is key to all activities. More than creating a policy, governance begins with understanding the types of investment the company is making and where this alternative investment vehicle—digital assets like Bitcoin—fits within the broader investment strategy. Leaders also need to be comfortable with the characteristics and nature of the vehicle. Ultimately, governance is all about monitoring and assuring that the conditions and requirements set by the organization are maintained.
Regulatory Misalignment of Stakeholder Incentives in the Political Battleground of Digital Assets
Out of those professional investors, 36% already have blockchain-inspired assets in their portfolio either through direct investment in cryptocurrencies, stablecoins, and security tokens or via funds, structured products, or futures. Making the first foray into crypto investing can be an intimidating prospect, but the reality is that it is easier than ever to achieve a crypto allocation, for both retail and institutions alike. Firms like MicroStrategy and Tesla chose to achieve their Bitcoin allocation through direct ownership of crypto, purchased and custodied through US prime brokerage services. Those who prefer not to own crypto directly, however, can choose from several crypto-backed ETPs now trading on stock exchanges in Canada and Europe. Although the US SEC has yet to approve a crypto ETF, Grayscale has provided an investment avenue for US institutional investors via a trust structure. The Grayscale trusts take on new investors via private placements, buying cryptocurrencies in the background to achieve the underlying backing for the shares.
Look at the team, their track record, and then at the traction of the business. For more on the institutional adoption of crypto assets in Canada, check out The rise of cryptoasset adoption in Canada. Canadians under the age of 35 and males of all ages were more likely to have invested in crypto assets and are interested in gaining exposure to the asset class. Blockdata compiled a list of the 13 banks that have invested the most in cryptocurrency and blockchain companies to date. “The adoption of crypto and other digital assets is advancing at an unprecedented rate,” said Julian Sawyer, CEO of Bitstamp. These new sources of funding will not be reflected in the Bitcoin price immediately. The co-founders of leading blockchain analytics firm Glassnode are revealing that institutional investors are loading up on Bitcoin as BTC trades below the $30,000 level. The firms surveyed cited price volatility as the biggest obstacle for new investors, followed by the lack of fundamentals needed to assess value and concerns around market manipulation.
These trusts provided an easy answer to institutional investors wondering how to invest in crypto, and Grayscale reported higher inflows for every subsequent quarter of 2020. Further inflows in Q1 of 2021, combined with the continued rising price of Bitcoin, grew Grayscale’s Bitcoin trust to $36 billion under management, as of May 5th, 2021. With another $8.7b in the Ethereum Trust, Grayscale is one of the fastest-growing asset managers of all time. Regulation aside, IROs might be surprised at the pace of innovation that will replace the plumbing of institutional financial services infrastructure in the future, now being influenced by digital assets and blockchain. The next decade of capital markets infrastructure for brokerages, investment advisers, custody and settlement may be significantly different. Institutions have seen this future – and may be further along in delivering it – than those not following digital assets realize. This paper focuses largely on Bitcoin investments, considering recent increased investments in Bitcoin, and its common reference as a store of value.
As shown below, well over half of high-net-worth investors in Europe and Asia have access to digital assets, directly or through financial advisors. Additionally, about half of US family offices and about 30% of family offices in Europe and Asia already hold digital assets. Before 2018, Kim said that the crypto sector was heavily focused on attracting retail investors. Since then, Kim said institutional investors have become more interested in digital assets, and this has allowed Abra, in particular, to grow its institutional client base. The launch of actively managed crypto strategies like Abra’s is a response to institutional investors who want something more than just a token exposure to crypto and who want to learn how to make the asset a significant part of their portfolios, Kim said. Crypto brokerage Voyager Digital holds 12,260 BTC according to bitcointreasuries.org, worth around $267 million at current prices. The firm aims to provide a one-stop shop for trading digital assets, and in May 2021 reported quarterly revenue of $60.4 million, up 16x from the previous quarter. “We saw exponential adoption of cryptocurrencies as a recognized and investable asset class,” said CEO Steven Ehrlich at the time. Periodic surveys bear this out, with a growing number of institutional investors allocating a percentage of their portfolios to digital assets. A recent study conducted by Fidelity Digital Assetsfoundthat seven in ten institutional investors expect to buy or invest in cryptoassets in the near future.
For long-short equity funds, their engagement in Bitcoin and crypto has also often been via an extension of strategies such as factor-based investing, tail-risk hedging/asymmetric bets, or stock-picking. Nevertheless, pensions, endowments and foundationshave still been some of the slowest investors to adopt cryptocurrencies, according to a Fidelity survey of institutional investors featured in a Bridgewater paper in January. Out of the surveyed financial advisors, high net-worth individuals, and family offices, U.S. pensions and endowments accounted for the lowest crypto adoption rates. Exchange-traded funds, or ETFs, are the most common indirect form of investment.
- Custodians provide solutions for investors who want to securely store and protect their crypto assets.
- Reports that asset manager Fusang Investment Office — which focuses on Asian private family offices and investments — will launch a crypto-custody service in Hong Kong.
- One startup, the derivatives exchange FTX, managed to raise $900 million to achieve a cool valuation of $18 billion.
- Prior to investing in any digital asset, it is important to understand the specific terms, conditions, and characteristics of the investment since those will affect accounting, tax, risk, controls, and legal considerations, among others.
- It provides a general overview of the news-worthy institutional investments over the past year and a categorization of use cases of such investments as we observe them.
Specie insurance provides coverage that is limited to a specific location or in transit. That geographical limitation makes specie more affordable, which means insured limits can be much higher than for traditional crime coverage on cryptocurrency but only while in cold storage. What all of these elements have in common is that they all shoulder fundamental risks, whether that’s cybercrime, the loss of physical property or the risk of litigation when operations go sour for financial institutions’ customers. The move was hailed as a landmark for the crypto industry, though that hasn’t been borne out by Coinbase’s declining stock price; having debuted at $381, by July 2022 COIN was trading under $75. The company also explained that it generates fiat income by leveraging its reserve of self-mined and held Bitcoin, “via yield account arrangements with leading digital asset prime brokerages.” According to Tesla’s Q2 balance sheet, its digital asset holdings amounted to $218 million in the second quarter of 2022, down from $1.26 billion in the previous quarter. In the wake of the crash, the list of the companies with the biggest Bitcoin holdings has been shaken up, with some firms selling off part of their crypto stashes as the market slumped.