By CCN: 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. Bloomberg's Matthew Leising said…
By CCN: 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.
“For the price of Bitcoin, this might be the best news that it’s had in maybe a year or so.”
Fidelity’s entry to the crypto market is significant for two reasons. Firstly, the firm’s reputation on Wall Street lends bitcoin a huge nod of trust and confidence. As Leising explains:
“What it tells the broader street is that someone with decades of relationships and trust on Wall Street, Fidelity is kind of throwing its weight behind this and saying ‘hey, we can work with it, you can work with it too.’”
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.
Fidelity’s presence in the nascent crypto space will go some way to bringing trust to the market.
Secondly, bitcoin trading has previously been dominated by retail investors. Leising pointed to big names like E-Trade that recently embraced crypto, but said they were focused on retail. Fidelity will shift the spectrum to “big money” institutions.
“[E-Trade is] more focused on the retail side. What Fidelity is going for is institutional investors so pensions, family offices, hedge funds. Sophisticated investors with more money to spend.”
While the exact details of Fidelity’s crypto platform remain secret, the investment firm launched a custody service earlier this year. Under the operating name Fidelity Digital Assets, the firm has onboarded at least five major clients.
“The other thing to keep in mind is a few months ago Fidelity started a custody service for bitcoin, meaning if you’re an investor and you hold a bunch of bitcoin you can have Fidelity take over it for you and custody it and it kind of is a better way, it’s a lot more secure with Fidelity.”
This custody service is a big pull for institutions. Until now, hedge funds, pensions, and family offices have been reluctant to allocate assets to crypto because of the difficulty of storing it securely. The custody service combined with Fidelity’s familiar trading tools makes for a game-changing platform.
“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.”
After the news of Fidelity’s crypto plans broke, the bitcoin price surged to $5,910 on Coinbase, a new 2019 high. In the past week, BTC has racked up 11 percent gains and added $20 billion to the crypto market capitalization.
As the underlying architecture of crypto trading and storage improves, institutions are growing more comfortable with this disruptive technology.
Last modified: January 10, 2020 2:44 PM UTC