Institutional and Banking Adoption
Traditional Investment Manager Adoption
- Guggenheim Partners – a £315bn US investment firm has publicly stated their view of a potential for Bitcoin price to reach between $400k and $600k in the long term. They have also submitted a filing with the SEC for registering the Guggenheim Active Allocation Fund which will invest in financial products, such as derivatives, whose value tracks that of underlying crypto assets. Interestingly this is the second fund filing, where the first, in November, Guggenheim Funds Trust filed with the SEC to allow its $5 billion Macro Opportunities Fund to invest up to 10% of the fund’s net asset value in the Grayscale Bitcoin Trust (GBTC), an ETP that tracks the price of Bitcoin.
“The Fund may seek investment exposure to cryptocurrency (notably, Bitcoin), often referred to as “virtual currency” or “digital currency,” through cash settled derivatives instruments, such as cash settled exchange traded futures, or through investment vehicles that offer exposure to Bitcoin or other cryptocurrencies through direct investments or indirect exposure such as derivatives contracts,”
SEC FILING QUOTE
The second filing as we mention above is extremely interesting when assessing the chain of events. Initially towards the latter part of 2020, the fund announced its prediction on the potential future value of Bitcoin reaching $400k-$600k, since then crypto prices rose aggressively and the approval for the first fund (to invest in the spot market) arguably was received after missing out of sizable upside. The pace of this rally was greater than most expected and Guggenheim impressively predicted the most recent top also the 50% pullback in prices. One can now argue that with the onset of the retracement in price the position of Guggenheim might have shifted from purely investing long via spot transactions, to taking leveraged long bets to capitalize on future rapid growth.
GHOST STAKING OPINION
Banking Adoption
There has been a systemic structural shift in the stance of international investment banks within increasing numbers beginning to offer crypto asset relegated services to their wealthy clients.
- ICAP – The worlds larges interdealer broker has announced on 29th June 2021 that it will launching a crypto currency trading platform with Fidelity Investments and Standard Chartered’s digital assets custody unit. The platform will offer post-trade infrastructure with a network of digital asset custodians – this is a key development in the adoption of crypto within the institutional space as historically larger investors have been risk averse due to the security and logics around holding digital assets.
- Citigroup – Citigroup has officially launched a new business unit (named Digital Assets Group) which will sit within its Wealth Management division. Citigroup is also working with technology firm Consensys to develop a blockchain-based platform for commodity trading:
“Given the exciting new developments we are seeing around cryptocurrencies, tokenization, and other advances powered by blockchain technology, we are pleased to announce the formation of the Digital Assets Group…And it doesn’t behave as one would intuitively expect relative to other assets given the analogy to digital gold; to date, it’s tended to be more aligned with risk-on assets. But clients and beyond are largely treating it as a new asset class, which is notable—it’s not often that we get to witness the emergence of a new asset class.”
Citigroup memo
- Morgan Stanley – earlier this year, the bank instructed its financial advisors to offer high net worth clients, access to three crypto funds (2 Galaxy Digital, and 1 NYDIG). The bank’s wealth management division contains $4 trillion dollars in client assets.
- Goldman Sachs – a much publicised U-turn on its stance with regard to cryptocurrency, defining it as an asset class and also assenting their view of Ethereum becoming the dominant blockchain (note CSPR is the early implementation of CBC protocol expected for release in ETH3.0). Goldman Sachs has relaunched a dedicated trading desk for crypto assets within its markets division. The desk will start by trading futures and derivatives such as non-deliverable forwards
“Bitcoin is now considered an investable asset. It has its own idiosyncratic risk, partly because it’s still relatively new and going through an adoption phase,”
Mathew McDermott, Goldman Sachs’ global head of digital assets
- HSBC – reported in March last year that it is planned to move the settlement of $20bn in assets onto a new blockchain-based custody platform built by the bankr. The platform, known as Digital Vault, will give investors access to records of securities bought on private markets in real-time based on open-source blockchain technology by R3. They are also developing a letter of credit platform on blockchain – although still in development, 18 transactions were successfully completed on the system
- JP Morgan – one of Wall Street’s biggest Bitcoin bull, where analysts at the bank support a long term bitcoin price of $146k – JP Morgan has developed a blockchain network that is being used by 50 banks in 78 countries.
- UBS – announced that they would lead a consortium of lenders to launch a blockchain-based trade-settlement platform called we.trade to offer services such as bank payment guarantees and invoice financing.
In addition to the shift in investment banking sentiment and adoption, we can note a sizeable increase in ‘smart money’ investment into the crypto space. This is in the form of (1) crypto specific funds and (2) more traditional investment funds.
Crypto Specific Funds
Disclaimer: This article is written for the purposes of research and does not constitute financial advice or a recommendation to buy.
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