Most of the money invested in cryptocurrencies, precisely $365 billion, are investments by individual investors and not by institutions. However, it looks like that’s finally about to change. Major Wall Street banks earlier this month moved towards entering the cryptocurrency market. This comes after an announcement made by Coinbase, the largest U.S. Bitcoin exchange.
Coinbase has just launched new professional-grade trading products for institutional investors this week and they have cited rising demand for cryptocurrency from institutional heavyweights for this launch.
Adam White, Coinbase’s general manager, who runs its institutional business says “How we’ve seen it play out in the institutional space, very few want to be first, but most want to be second.”
Now, back to the topic of Wall Street banks entering the cryptocurrency market. Goldman Sachs revealed in early May that it is opening a Bitcoin trading desk, and JP Morgan Chase was quoted saying that the bank is “looking into the space”. To this effect, they have named their first-ever head of crypto-assets strategy to oversee the operation.
Adam White has also said, “In a couple years we’re going to look at Goldman Sachs’ announcement that they’re going to begin trading cryptocurrency as very much a watershed moment”.
However hacking still remains one of Wall Street’s main concerns over investing in cryptocurrency. Instances of famous Bitcoin exchanges being hacked are too many, including the infamous Mt. Gox, which lost a record 650,000 BTC — worth more than $5 billion today. Even Coinbase has faced similar issues when hackers have attacked and drained scores of its customer accounts, including those of prominent investors, although none of their systems has been breached.
Coinbase has hence come up with a custody service to securely hold (with a minimum deposit of $10 million) cryptocurrency on behalf of big investors. Coinbase currently has a net storage of $20 billion in digital currency, most of which belong to retail investors. According to White, the company expects that amount to jump 50% once the custody product goes live.
“By our best estimates, there’s at least $10 billion in institutional capital that’s waiting on the sidelines just to move in for a safe custodianship product, just for cryptocurrency alone,” says White.
But while Coinbase’s business currently revolves around the financial industry, its ultimate aim is to be much more than a bank or fintech company.
“Very simply said, we want to be the Google of crypto,” says White.
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