5 Big Financial Institutions Betting Big On Cryptocurrencies
The age of cryptocurrencies is upon us, and everyone wants in: bankers, wall street, hedge funds, pension funds, mutual funds, stock brokers and traditional asset managers. The entrance of mainstream financial institutions into cryptocurrency industry is the beginning of another wave of higher valuations. They have realized you are either with it or get left behind.
Traditional financial institutions have come around from scoffing at cryptocurrencies to flocking into the industry. They no longer seem to care that cryptocurrencies emerged as an alternative to disrupt them. They have realized you are either with it or get left behind.
Cryptocurrencies are far more efficient and better aligned with the future of the internet than the traditional financial system. The whole industry is up 15,000% since 2009, outstripping all other asset classes. Who can resist such a lucrative opportunity?
The age of cryptocurrencies is upon us, and everyone wants in: bankers, wall street, hedge funds, pension funds, mutual funds, stock brokers and traditional asset managers. The following mainstream financial institutions have made the bold move of buying into cryptocurrencies in one form or another.
Banks don't want to get left behind
The internet disrupted most industries besides banking. But the emergence of cryptocurrencies created independent currencies that can store and transmit value faster than any bank in the world. Banks no longer have a monopoly on the creation and movement of money they had for centuries.
In May 2017, Skandiabanken bank, the largest internet-only bank in Norway, allowed its customers to link their accounts to bitcoin wallets. Customers today can access a bitcoin account integrated via Coinbase to purchase, store and view cryptocurrency balances. The bank's executives recognize and accept Bitcoin as an investment class.
In the United States, Coinbase also partnered with American financial services USAA Bank. Thanks to a Coinbase integration, USAA Bank's customers, mostly military personnel and their families, can access bitcoin balances through the bank's portal. Coinbase connects their bank accounts to a back-end bitcoin wallet. The military bank is one of the few banks in the US that are open-minded about alternative finance.
You can bet that banks are cognisant of the impending disruption by cryptocurrencies. That is why the smart ones are adapting to technology before they get eaten up.
Mutual Funds make cryptocurrencies accessible to mainstream investors
Mainstream investors crave for exposure to cryptocurrencies without having to hold it directly. Because bitcoin is not a registered security, Wall Street funds have had to come up with financial instruments that put a traditional wrapper on this esoteric asset class.
The Bitcoin Investment Trust is a passively managed open-end trust backed by bitcoin. The fund strips away the complexity of owning bitcoin by allowing investors to buy it indirectly. Each share in the fund represents 0.1 bitcoin, and the number of shares is unlimited. Investors can buy more or redeem their shares for cash at any time. According to mandatory regulatory filings, the fund held 174,174 bitcoins at the end of 2016.
The Bitcoin Investment Trust is one of the few alternatives available for mainstream investors to add bitcoin to their portfolio without actually holding it. It has attracted mainstream ETFs that trade on public exchanges. One of the most prominent, New York-based Ark Investment Management, has a stake in the Bitcoin Investment fund via two of its funds.
The fund trades on OTCQX markets as GBTC but is pretty exclusive. It is limited to accredited investors earning over $200,000 or have a net worth of at least $1million. The minimum viable investment to GBTC is $25,000.
The appetite for exotic assets by mainstream investors and institutions will only fuel demand for cryptocurrencies. With more on-ramps like the Bitcoin Investment Trust, the only way left for the price to go is up.
Investment Banks and Pension Funds diversify their assets into cryptocurrencies
It can be frustrating watching a new asset class take off with phenomenal returns while holding a basket of average yielding investments. Traditional pension funds and investments know this feeling too well after watching Bitcoin skyrocket in 3 years. So, in response to the changing tide, they are jumping in on cryptocurrencies.
Fidelity, a 71-year-old asset management company got involved in the cryptocurrency space in June 2017. The company handles $2.2 trillion assets for 23,000 companies and 26 million retirees retirement and savers. Fidelity has a partnership with Coinbase that allows customers to view their bitcoin balances via the company's website. Additionally, the company has made venture investments in cryptocurrency companies
Fidelity is not the only high-profile investment firm feeling the heat. Investors at Goldman Sachs petitioned the investment bank to start covering bitcoin in their reports. Since May 2017, a periodic report titled "GS Techs: Quick BTC" is dedicated to keeping up with bitcoin prices. The bank's Chief Technician Sheba Jafari covers the asset class' price movements.
Asset managers, starved of volatility in other asset classes, are turning to cryptocurrencies for better returns.
Investment brokers now offer options for their clients
The largest online trading platform in the UK now offers its clients an investment avenue into bitcoin. Hargreaves Lansdown, which handles £70 billion of investors funds, made a bold move to offer its 876,000 clients exposure to bitcoin in June of 2017. The Swedish listed Bitcoin Electronic Traded Note (ETN) is available to clients through their normal broking account and personal pension investment account.
Clients already had access to the Bitcoin Investment Trust. The ETN added an alternative for clients seeking exposure to this new breed of alternative currencies.
Hedge Funds want in on 50,000% Returns
Hedge funds are notorious for raking in billions of dollars from high-frequency trading and sophisticated hedging strategies. Naturally, they are interested in anything that has a potential for astronomical returns. But they are restricted by custodianship rules to invest in cryptocurrency directly. It is why new hedge funds have sprung up solely dedicated to investing in cryptocurrencies on their behalf.
Pantera Capital announced plans to launch a $100 million cryptocurrency dedicated hedge fund in June 2017. The fund, led by Dan Morehead, will invest in initial coin offerings (ICOs). ICOs are investing in cryptocurrency tokens that are integral to the functioning of open source protocols. They plan to invest in ten to twenty cryptocurrency pegged projects.
Pantera ICO fund LP has filed with the US Securities Exchange Commission to launch a hedge fund for accredited investors. The fund will be open to private and institutional investors based in the United States. Pantera is clear on its objective of speculating on ICOs as a third party managed service for investors. Risk mitigation, diversification and scouting pre-market cryptocurrency projects will be top of the agenda.
Texas-based fund manager Mark Hart spoke to real Vision TV about his findings from closed-door sources. 5% of hedge fund managers own bitcoin, and only 0.5% of hedge funds hold bitcoin. The hedge fund industry wants in on cryptocurrency, but the avenues are limited.
With more funds like Pantera ICO fund, Polychain, Alphabit and MetaStable Capital coming up, a lot of eager capital on the sidelines is about to flow into cryptocurrencies.
The entrance of mainstream financial institutions into the cryptocurrency industry is the beginning of another wave of higher valuations. The massive capital inflow from traditional firms will certainly drive up cryptocurrency prices to unprecedented levels. The few bold ones that have made the first leap have set the example for their peers. Once word gets out, you will see more firms come out publicly about their cryptocurrency forays.