๐๐World's 4th largest assetmanager Fidelity to service institutional investors with custodial and trading options ๐๐
With $7.2 TRILLION dollars and 27 million clients, Fidelity is the 4th largest assetmanagement company in the world and it is now looking to service it's 13,000 institutional investors with cryptocurrency related services such as custody and brokerage. That makes Fidelity the first of the existing financial order to create a bridge between the old financial world and crypto.
Fidelity
Fidelity investments is huge. With 27 million clients and a whopping $7.2 trillion (with a 't') dollars in assetmanagement it is the world's 4th largest assetmanager in the world. After servicing the traditional financial world for years, Fidelity has announced this monday that it is starting a subsidiary called Fidelity Digital Asset Services, which intends to provide custodial and brokerage services to it's 13.000 existing institutional investors.
Fidelity Digital Asset Services is no small endeavour either. With 100 employees it is targetting Fidelity's existing institutional customerbase and is working on onboarding the first of them right now. Early 2019 they will open up their services to the general public.
Crypto-custody and brokerage is big
While a lot of eyes have been fixated on ETF's, which do not deal in 'physical Bitcoins' but derivatives, this announcement by Fidelity is actually potentially a huge deal. Fidelity enjoys an existing reputation as one of the leading financial service providers and has a long track record of assetmanagement.
Large institutions are waiting on the side-lines, eager to step into crypto, but until now have missed the tools they require in order to do so. One major hurdle they face is the risks involved with crypto with regards to hackers, theft or simply user error. It is for this reason that custodial services are being worked on by companies such as Coinbase or Gemini, but also being explored by Goldman Sachs and Northern Trust. Fidelity is now the first party to actually start offering these services, which will enable institutions to enter the crypto-space without worrying about the associated risks of crypto-assetmanagement.
Not only will Fidelity take care of the custodial side of things, but they will also allow for the buying and selling of cryptocurrencies such as Bitcoin and Ethereum 'and others', through multiple market venues that fit their high Fidelity quality criteria. Assumingly this means they will partner up with a variety of exchanges, of which Coinbase might be a likely contender considering there is some link between the Fidelity phone app and Coinbase already.
13.000 institutional investors
Essentially this means that the last major hurdle is being taken away for institutional investors to enter the space, of which Fidelity knows at least 13.000. Much like how these institutions would be able to invest in, for example, gold they can now invest in crypto in more or less the same way.Although the institutional clients themselves will not hold actual Bitcoin and other cryptocurrencies, Fidelity will hold these for them. Much unlike the much-discussed ETF's and Futures markets, the Fidelity custodial and brokerage services will hold and manage actual crypto. In other words: institutions can actually buy in now and their buying will take actual crypto off the market.
Forget about the ETF! Fidelity Digital Asset Services could be a lot better! Together with the upcoming Bakkt, I believe we are nearing the time that the onboarding of actual institutions into the space can begin. Is it time for another bull-run? We'll see. Usually these things tend to take a few months to garner some momentum, but sooner or later it is bound to have an impact and bring in the fresh money that the crypto-market so desperately needs right now.
> Read the news about Fidelity's new services on CNBC here <
Yawn, another big player entering the space to not nearly enough hype! I understand the significance of the service it provides. But if institutional money wants into crypto, securely, there are already more than enough ways, without the costly services of a middle man. One spotty faced youth who knows his stuff is enough to get started! Any major corporation with a decent sized financial and IT division should be more than capable of securing a few 2FA codes and private keys!
But more importantly, this is one less excuse that the bears have to continue to drag their toes and one more item of news that adds to the buoyancy of the approaching bull run. There is so much latent buoyancy now that I think we are going to all be astounded by this market in the not-too-distant future!
I think you're underestimating the custodian situation. Yes, surely if a company wants to invest $50K or $100K into crypto that spotty faced youth and the IT department can handle it, but what if you need to secure $1 billion dollars worth of crypto?
It's not just as simple as getting a hardware wallet. You'll need armed guards at some point, just as if you were guarding physical gold, to prevent armed robbery. Or what about theft, perhaps even by the spotty faced youth himself? And do you trust spotty faced youth's capabilities enough to stake $1 billion dollars on it? What if it's not your $1 billion dollars, but customer' money instead? What if a single mistake could bankrupt your entire business? Make no mistake, safeguarding big amounts of value is serious business. Pensionfunds, hedgefunds, etc. don't even want to touch crypto unless they can offload the risk to a middle-man, much like they don't want to have their own vaults filled with gold when they invest in gold. Rather, they pay somebody with a Fort Knox safe to guard it. Same is true with crypto.
I believe the Winklevoss twins have their crypto spread out over more than 60 locations around the globe, protected in vaults with armed guards (one is in Switzerland in a nuclear bunker), protected with multi-sig in cold storage.
Crypto security changes significantly when you own more of it. $100 bucks is something you can trust an exchange with. When you get to about $2000-3000 bucks, suddenly you're gonna want a hardware wallet. When it gets to $20K you'll be keeping it spread out over multiple wallets, and start wondering how much risk there is in keeping it all in your own house.
Pic relevant, I guess, but mostly for the lolz
Yeah, Mr Spotty Faced Youth was more an indication of minimum capability required than a practical solution, I've no doubt he would steal the money eventually! ๐
Of course you are right, the crypto would required proper (multiple) measures to secure it, spread out too as you suggest.
Perhaps it is in my strategic nature to want to do things like this "in-house". I don't believe in delegating major responsibilities away to an external party. I could give numerous reasons for this, mostly from my military background. The gist of it is that you sit without control of your core capabilities when you need them most i.e. when everything turns pear shaped.
But I agree that things probably will go the way of large third party custodians. I'm just suggesting that they shouldn't have to.
I like to be self-sufficient too, if only because I don't feel like paying for stuff I can do myself.
But in the case of large corporations and institutions, the attitude is very different. I've found that they usually like as little responsibility and risk as possible, and even a 0.1% risk requires a 100% failsafe is at all possible. Hedging risks, etc.
It's also because of this attitude that I think Bitcoin is going to succeed, by the way. As Satoshi famously wrote:
โIt might make sense just to get some Bitcoin in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy.โ
It's going to start with a 0.1% chance of Bitcoin succeeding against all odds, which will require a position to hedge against the 0.1% risk of it happening. This will increase the chances of it actually happening, thus again increasing the necessity to hedge (more) against it. Enter fomo-spiral somewhere around here?
I can't wait to see what institutional FOMO looks like in practise!
I think it will be slow and steady over time.
Let's not forget that institutions are not here to make us all rich, but rather themselves. They will find new ways to manipulate the market I am sure. Just hodl and ride it all out is my advice. From 2017 on the market was halfway out of our hands, but in 2019 it's going to be taken over completely by big money IMO
I'm glad you think that, and I hope it does play out that way. Slow and steady growth is my favourite kind: sustainable and low in volatility. Great for a hodl.
Yeah but the moment the slow and steady growth becomes noticeable, is when the FOMO kicks in and it switches from slow and steady into the biggest bull-run of the history of mankind?
That is what I am hoping.. the FOMO to end all FOMO's!
As Pandora has replied below, institutions that manage trillions in assets and family offices that manage millions to billions in assets are not going to entrust some "spotty" faced geek with their money. Their assets will require custodians with ironclad regulatory compliance, not some fly-by-night loser exchanges that have recently been under SEC scrutiny. One of these institutions have enough assets to buy the entire crypto-market ten times over, and you think such fund managers are going to open a Coinbase account?
Ha ha, yes I get your point, see my reply to Pandora.
I wonder if those guys will consider opening a coinbase/Binance/whatever account 10 years from now when crypto is massive by comparison!
ICE is launcing their BAKKT exchange in a few weeks for the institutional money to pour into the cryptomarket. Coinbase wisely repositioned itself to service those of us with modest assets in their portfolio, rather than competing with ICE. It is likely that as the cryptocurrency market expands to trillions in valuation, the "retail" type exchanges, like Coinbase and Gemini, will be purchased by more established financial providers, partly because these exchanges lack the experience, lobbying power, and financial network to accomodate the increased flow of capital.
When the cryptocurrency market rapidly increased in valuation in 2017, these "retail" exchages could not accomodate even increased application for verification process. It is unlikely that the "retail" exchanges can survive without mergering with the established financial institutions when the institutional capital flows in.
I expect different exchanges to cater to different market and customer types, I doubt that many decent ones will simply disappear.
Bakkt is indeed a game changer and should have a profound effect on the crypto market. I can't wait to see it in action!
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Thats a real big player getting into the game
This will open cryptocurrency to a whole new set of massive investors.