weekly roundup – Fed Paper on CBDC | Growing Institutional Interest
Over the past 7 days we’ve seen bitcoin swing 10% from its low to its high, and at one point last Wednesday, the price shot up 6% within an hour, only to fall 8% within five minutes soon after. At press time, bitcoin is trading largely unchanged on the day near $9,745, having recovered from lows below $9,400 over the weekend.
Here’s our weekly roundup of the industry news and big reads.
Bloomberg Predict BTC Will Hit $20,000 This Year
Bloomberg are making a bold prediction that BTC will hit $20k this year, with the one interesting caveat that “something needs to go really wrong for bitcoin not to appreciate”. This prediction is based on price patterns from the last few years and that if 2020 follows 2016’s trend (which was also a halving year) then we can expect some wild moves in the second half.
Growing Institutional Interest in BTC & ETH Helps Grayscale’s AUM Hit $4 Billion
Last Thursday crypto investment firm Grayscale reported that its total AUM had reached $4.0 billion, an increase of 8.1% compared to the size of the AUM a week earlier, and almost double what it was in May 2019. Q1 2020 was a record quarter for Grayscale. Grayscale’s Director of Investor Relations and Business Development Rayhaneh Sharif-Askari stated:
“From a broader perspective, COVID-19, and the policy implications especially, have really set the stage for bitcoin to be seen as the store-of-value asset that we had hoped it eventually would be. Institutional investors are taking active long positions in digital assets through our products.”
“In Q1, we have raised half a billion dollars across all of our products, $390 million of that was into our Bitcoin Trust. We also saw about $110 million in the Ethereum product.”
Even more interestingly, she pointed out that most of the interest in these investment products is from institutional rather than retail investors: “Since the inception of our firm, about 90% of the inflows have been from institutional investors. This past quarter, about 88% of the flows came from institutions.”
Podcast: Three Arrow’s Su Zhu on The Race to Build a Crypto Prime Broker
The past few weeks have seen a deluge of prime brokerage news, capped off by Coinbase’s announcement of its acquisition of crypto broker Tagomi.
After months of rumours surrounding the two-year-old firm, the deal became one of Coinbase’s biggest acquisitions in a move to fill out its institutional business of trading and custody services.
On this week’s episode of The Scoop, Su Zhu, crypto investor, market commentator and founder of crypto investing firm Three Arrows Capital – an early client of Tagomi – unpacks his thoughts on the recent deal, touching on some pain points, including the importance of neutrality in the prime brokerage world. The Coinbase deal leaves room for possible conflicts of interest, according to Zhu.
Ten Crypto Founder Things I Wish I Knew Before I Began
Our Founder and CEO was featured in the City AM Founders Series last week, describing his experience as a company founder in the crypto industry.
Oliver von Landsberg-Sadie reveals that “the market needed a friendly alternative, a simple, personal and well-informed service, and so began BCB. We started as a high-touch cryptocurrency brokerage and in 2019 launched our flagship product: business accounts for the blockchain industry, a regulated service that banks the unbankable.”
SEC Commissioner Hester Peirce Tapped for Second Term at US Regulator
Hester Peirce, one of five commissioners with the SEC, has been renominated for a second term at the U.S. regulatory agency. This is good news for the crypto industry, as she has been a vocal proponent of bitcoin ETFs and financial innovation more broadly. If this goes through, she will serve until 2025 – by which time market infrastructure should have evolved enough to remove regulatory opposition to more liquid products that broaden access to cryptocurrency investment.
Central Banks Could Monopolise Commercial Banking Sector via CBDC, Says Federal Reserve
A new working paper from the Federal Reserve Bank of Philadelphia indicates that the development of a central bank digital currency may create a fundamental shift in the way banks operate. According to the paper, CBDC could make banking institutions more competitive with emerging fintech firms and investment banks:
“The introduction of a central bank digital currency allows the central bank to engage in large-scale intermediation by competing with private financial intermediaries for deposits. Yet, since a central bank is not an investment expert, it cannot invest in long-term projects itself but relies on investment banks to do so. We derive an equivalence result that shows that absent a banking panic, the set of allocations achieved with private financial intermediation will also be achieved with a CBDC.”
In other words, a CBDC amounts to giving consumers the possibility of holding a bank account with the central bank directly. The researchers also note that the lack of flexibility within a central bank’s contract with investment banks will also deter bank runs in the event of a financial panic.
Fidelity Reveals Bitcoin and Cryptocurrency Adoption among Institutional Investors on the Rise
Fidelity Digital Assets, the crypto trading and custody arm of Fidelity Investments, which manages over $7 trillion in client assets, says institutional investors continue to be interested in BTC and cryptocurrencies.
In a series of tweets, the firm revealed some of the findings of its annual Institutional Investors Digital Asset Study. According to Fidelity:
“The results suggest that digital assets continue to gain adoption and interest by a variety of institutional investors.”
The results from last year’s study show that four in 10 institutional investors are willing to invest in digital assets over the next five years. Of the institutional investors surveyed at the time, 72% prefer buying investment products that hold digital assets, 57% prefer buying crypto assets directly, and 57% prefer buying investment products that hold digital asset companies.
Fidelity says the research will help the industry understand the obstacles that are preventing the adoption of digital assets while also outlining the factors that institutions find most appealing.