he bitcoin world was shaken up earlier this week with the announcement that Fidelity Investments, financial services powerhouse, will be launching a cryptocurrency trading service “within a few weeks.”
Based in Boston, Massachusetts, Fidelity Investments Inc. is one of the largest asset managers in the world. According to a report by Bloomberg a source familiar with the matter said Fidelity Investments will buy and sell the world’s most popular digital asset for institutional customers.
In October 2018 Fidelity Investments created Fidelity Digital Assets in a gamble that Wall Street’s desire for trading digital currencies would grow.
Fidelity has made a significant step and has leap fogged much of its competition with the announcement by being one of the first major players on Wall Street to embrace Bitcoin.
In an email, Fidelity spokeswoman Arlene Roberts told Bloomberg,“We currently have a select set of clients we’re supporting on our platform,” she added:
“We will continue to roll out our services over the coming weeks and months based on our clients’ needs, jurisdictions, and other factors. Currently, our service offering is focused on Bitcoin.”
At current state the services will be provided only to institutional customers and not retail investors which are targeted by companies like E*Trade Financial Corp. or Robinhood. The decision may be based on a study commissioned by Fidelity that found 47% of institutional investors "appreciate that digital assets are an innovative technology play."
"We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments."
"More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets - new and old - becomes more readily apparent,"
Fidelity Digital Assets president Tom Jessop commented on the survey. As a side note, the report also found that one fifth of the institutional investors it surveyed were already working with digital assets.
To date, Fidelity has almost $7 trillion USD in customer assets, of which over 40% ($2.8 trillion) come from institutional investors. Paired with the 80% uptrend of Bitcoin since December 2018s low of $3,196/BTC (USD) and there are many reasons why this move is a long awaited one.
Some reasons for the delay come from government and regulatory issues
Several attempts to launch a Bitcoin-based Exchange-Traded Fund in 2018 and 2019 have fallen through. The U.S Securities and Exchange Commission (SEC) either rejected or delayed its decision on such proposals, mostly over concerns of market manipulation.
A March 2019 report by Bitwise found that 95%of Bitcoin and other cryptocurrency trading volume is fake. China recently also proposed a ban on Bitcoin mining farms. To add to the mistrust of potential investors, the cryptocurrency market continues to be riddled with stories and allegations of fraud, theft and regulatory infractions.
Last month, Bitfinex, a cryptocurrency exchange and Tether, a stablecoin (a special type of cryptocurrency whose value is tied to the value of a real-world asset, like the U.S. dollar), allegedly covered up the loss of almost $1 billion in customer funds by using Tether cash reserves. (read more)
Vancouver-based Quadriga Fintech Solutions Corp., which is going through bankruptcy in Canada, owes 115,000 clients about $193 million in cryptocurrencies and cash after the death of founder Gerry Cotten last year.
The continued black marks are likely keeping many traditional investors away from the space for now. However, Fidelity aims to change the perception by providing a brand and business to institutions that they can trust.
Tom Jessop, president of Fidelity Digital Assets said in an interview with Bloomberg, "people are relying on the institutions they’ve done business with for a long time to fulfill their objectives and needs."
Alongside Fidelity the New York Stock Exchange is looking to join the cryptocurrency space and its parent company, Intercontinental Exchange (ICE), is soon to launch its bitcoin futures trading platform Bakkt complete with its custody service.
The presence of Fidelity and NYSE in the cryptocurrency space will likely spur growth and provide the needed encouragement to more hedge fund managers, family offices and pension funds to allocate funds to cryptocurrency investments.
Depending on the success of Fidelity and ICE, Wall Street will be hard pressed not to join in. Do you think Fidelity will effect Bitcoin (BTC) prices? Let us know in the comments below!