Institutions can prepare for crypto

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Trading Reimagined is a bi-weekly content series that examines how the transformative power of technology is driving the reinvention of markets. Trading Reimagined is sponsored by Exegy.

Great buy-side investment managers are typically conservative and cautious, happy to allow others to be the first to adopt new processes and technologies and enter new markets. Thus, the collapse of the highly publicized cryptocurrency exchange FTX at the end of 2022 could have spelled the end of institutional interest in digital assets.

But digital assets have held up as the price of Bitcoin, the fastest single-digit indicator of market health, has soared more than 80% this year, to over $30,000.

More importantly for the institutional adoption of crypto and other digital assets, the CEO of the world’s largest, and arguably most influential, investment manager was decidedly constructive on the asset class in a recent interview. televised.

The role of crypto is to digitize gold, BlackRocks Larry Fink told Fox Business on July 5.

Finoa, a crypto custodian based in Europe, released a December 2022 report with a crypto adoption curve showing retail investors and traders, and some venture capital funds got involved in crypto circa 2017 Market makers and prime brokers signed around 2018; financial advisors and private bankers have embraced crypto in 2022. The final frontier with an unknown date will be larger institutions such as mutual funds, pension funds, and insurance companies.

Source: Finnish

Increased crypto activity from existing players is helping to boost liquidity, improving market conditions at least gradually for larger institutions.

Robert Street, Exegy

“We’ve seen increased interest from professional traders in the crypto options space,” said Robert Kallay, director of automated trading solutions for Exegy, whose Metro trading platform recently added Deribit Options. “There have been bumps in the road over the past year, but when someone as influential as BlackRock’s Larry Fink speaks constructively about Bitcoin, it builds confidence in the asset class.

BlackRock, which manages $8.6 trillion, filed an application with the U.S. Securities and Exchange Commission for a spot Bitcoin ETF in June. Fidelity Investments followed two weeks later with its own app, and WisdomTree, VanEck and Invesco also showed interest.

According to Digital Asset Research, some of the largest exchange-traded crypto products and funds grew assets under management by around 40% between May and June. The company said it “believes crypto exchange-traded products and funds (ETPs and ETFs) are the next area of ​​focus for traditional financial institutions.”

Over the past few years, at industry conferences, buy-side executives have stated that they need crypto regulation, and in particular crypto regulatory clarity, in order to participate in the nascent market. The SEC’s green light to a branded asset management app for a Bitcoin ETF would be a significant step in that direction.

Cboe Clear Digital, the digital assets unit of Cboe Global Markets, said on June 6 it had received approval from the Commodity Futures Trading Commission for margined futures contracts. The initial product launch will include Bitcoin and Ether contracts physically and financially settled in the second half of this year.

In a May 5 conference call to discuss first-quarter results, Cboe executives said there were a number of futures commission merchants ready to onboard once regulatory clearance is obtained. . Spot trading is hampered by the regulatory environment, Cboe chief strategy officer John Deters said on the call. We believe that the derivative products that we are preparing really change that, because there is complete regulatory clarity around this set of products. It is therefore a catalyst from our point of view.

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