The expected inflow of institutional capital into the crypto market has been a popular narrative in recent years, but often with limited traction. Now, given the 2020 macroeconomic backdrop, this is actually happening. Preparations for institutional participation were made and corporate-level solutions for crypto custody, digital asset management and brokerage of trade executions were developed.
With the crypto market recently topping $ 1 trillion for the first time and forecast to grow fivefold, it is more important than ever to have institutional-grade tracks in place to capture this critical mass. Some of the projects at the forefront of this task are leading the way for the institutional cash flow that benefits the entire space.
The Digital Currency Group subsidiary, Grayscale Investments, has been in this space longer than most. The early adopters’ GBTC Bitcoin Trust offering was one of the few institutional products available for the legacy market, launched back in 2013. The customer base now includes more than 20 institutions with investments of over $ 100 million, including Ark Invest and Rothschild Investment Corporation, and it recently reached $ 20 billion in assets under management in its most recent milestone.
Until Grayscale encounters increased competition in this space, possibly in the form of Bitcoin ETF approval this year, growth is likely to continue to spike. It offers institutional-grade regulated investment products for a range of individual digital assets, including Bitcoin, Ethereum, and Litecoin, as well as cryptocurrency baskets like the large-cap funds.
Finxflo is the first hybrid liquidity aggregator that goes one step further than Tagomi’s solution. It consolidates Cefi and DeFi locations through a regulated platform, KYC process and wallet without having to open multiple accounts. The enterprise-level tools offer the best of both worlds, providing users with a liquidity sponge that allows them to execute trades at the best prices across 25+ exchanges and liquidity providers with minimal slippage, reduced risk and zero withdrawal fees. It offers the necessary institutional protection against front running and an optimal price without restricting the supply of liquidity.
Finxflo, in cooperation with the leading provider Fireblocks, also offers an institutional-grade insured storage solution to ensure that customer funds are kept in encrypted, separate vaults with access to insurance.
The Finxflo ecosystem is supported by the native FXF token, a Blockchain 3.0 asset that allows users to access all of Finxflo’s additional features, including staking, governance rights and reduced trading fees. It also opens up the world of DeFi protocols and cross-chain interoperability in the Ethereum and Tron ecosystems, and gives users the ability to provide liquidity and arbitrage opportunities for agriculture. With a private sale already sold out, FXF will be launched on Polkastarter, DEX and CEX in the coming weeks.
Tagomi, which was acquired by Coinbase last year, is a leading crypto prime brokerage platform that offers trading, custody, margin, lending, short selling, participation and funding in one account. Tagomi brings together access to over 14 exchange and liquidity trades so users can seamlessly combine balances on different accounts while accessing the best price execution, as well as 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 firms like Goldman Sachs, Citadel and KCG will lay the foundations for the next wave of institutional investors.
Fidelity digital assets
Fidelity Investments, one of the world’s largest financial services company with $ 3.3 trillion in assets under management, created Fidelity Digital Assets to bridge the gap between legacy funding and the crypto market. The new crypto department offers a full-service platform for companies for safe custody, trade processing and investment services. More recently, a Bitcoin Fund for Qualified Investors has been launched and is made available through family offices, registered investment advisors, and other institutions.
Fidelity’s survey of institutional investors found that 80% of respondents find crypto attractive as an asset class, which shows the space’s pent-up demand potential, provided solutions like Fidelity Digital Assets can provide the required product market customization.
The Intercontinental Exchange (ICE), which operates the New York Stock Exchange (NYSE), partnered with Microsoft to form a new company, Baakt, which uses its cloud solutions to enable consumers to buy, sell, store and issue cryptocurrencies worldwide enable network. Bakkt offers a range of digital asset services including a dedicated wallet and application, secure custody and trade execution. It also offers Bitcoin futures and options as a challenge to derivative products from the old Chicago Mercantile Exchange (CME), although these are traded in Bitcoin rather than cash.
Building on the initial success, Bakkt will go public through a merger with a special purpose vehicle (SPAC), VPC Impact Acquisition Holdings (VIH). The deal is valued at $ 2.1 billion and is expected to close in the second quarter. This is an important investment to capitalize on the growing institutional demand in this area. This follows a similar announcement by the Coinbase cryptocurrency platform and offers greater adoption to the digital asset market.
The institutional cycle
Central bank money printing has seen a surge in growth, especially in the US, as the M1 offering, which includes bank deposits in checking accounts and in physical currencies, increased by a staggering 70% year over year.
Understandably, institutional actors are increasingly concerned about the prospect of inflation, one of the main factors driving greater interest in a crypto industry to act as a hedge against it in 2020.
This potential use case for the gateway opens up more space for institutions and enables significant takeover in this coming cycle. The projects that are in the foreground build the infrastructure that institutions need to fulfill this role.
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