In light of the growing interest of endowments, pension, hedge and mutual funds in cryptocurrencies this year, cryptocurrency wallet firm Blockchain has announced a new service which targets institutional investors.
The institutional platform called Blockchain Principal Strategies will offer institutions and family offices customized access to markets as well as research.
An over-the-counter trading desk will be provided to the investors and this will operate as a ‘matchmaker and direct counterparty to clients, executing trades and managing associated risk’. Clients of the firm will also be offered managed investment offerings and this will include access to vetted early stage token offerings.
Opportunities to get in Early
Additionally, clients will be given the opportunity of making direct equity investments in promising startups.
“…we will also offer educational and networking opportunities with hopes of creating a broader, well-informed community around digital currencies moving forward,” said Institutional Sales and Strategy head at Blockchain, Breanne Madigan.
The new Blockchain product aimed at institutional investors builds on the momentum that has been evident in the past few months. Per research conducted by Willis Towers Watson, insurance funds, mutual funds, endowments and foundations, sovereign wealth funds and pension funds control approximately $131 trillion of the wealth in the world.
Lending Legitimacy to Digital Assets
According to some, the entry of large investors in the cryptocurrency market could assist in legitimizing digital assets as a whole.
“Even a small dollar amount is legitimizing. If that happens, every family office says, ‘Oh, Yale’s in. That gives us the excuse.'” Ari Paul, the current chief investment officer of BlockTower Capital, a cryptocurrency investment firm, and a former University of Chicago portfolio manager told CNBC in April this year.
Despite the increasing interest of institutional investors in cryptocurrencies, it has been argued that they are under-allocated especially with regards to Bitcoin. A research paper written late last year by an assistant professor at the John Hopkins University Carey Business School, Jim Kyung-Soo Liew, and Levar Hewlett, a Maryland State Retirement and Pension System quantitative risk management associate, suggested since Bitcoin was uncorrelated to other asset classes or investments, it was a good way for big investors to diversify their portfolio.
High Risk, High Returns
The research paper added that despite the high price volatility that Bitcoin experiences institutional investors stood to gain from a ‘higher Sharpe ratio’ relative to any traditional asset class.
“We argue that the institutional investor should seriously consider cryptocurrencies for inclusion into their portfolios at the 1-2% allocation range … Although this market is relatively small, with less than $300 billion in market capitalization and has many other weaknesses that investors must take into full account, we believe in the long run that the early institutional adopters will benefit,” wrote Liew and Hewlett.
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Last modified: March 4, 2021 5:09 PM