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Institutional and Banking Adoption

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,”


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.


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

Fund NameDescriptionAssets
Launch Date
CoinSharesLaunched in 2014, CoinShares became Europe’s first and largest Bitcoin investment fund. Having offered the world’s first Bitcoin-based securities in 2015, the firm has gone on to command investment firms outside of crypto.$1 billion+2014
500 Startups500 Startups is the most active early-stage venture capital fund in the world. The Silicon Valley-based fund has also invested in blockchain and cryptocurrency startups including BlockCypher and Hijro. 500 Startups boasts an investment portfolio of over 2,400 companies spanning over 75+ countries.$1.105 billion2010
GrayscaleFounded in 2013, Grayscale’s crypto fund has become the biggest in the world, posting record numbers in Q3 of 2020.$10 billion2013
Amentum Investment
Founded in 2017, Amentum Investment Management is a digital currency hedge fund that focuses on “diversity, security, interoperability, and sustainability for blockchain-based protocols and applications,” according to its website. The fund has invested in Bitcoin and Ether among other tokens, to date.$10-20 million2017
BlockTowerBlockTower, which was founded in 2017 and is based in Stamford, CT., focuses on event-driven trading strategies and thematic investments.$100 million2017
3iQ Corp The Bitcoin FundFounded in 2012 by Jean-Luc Landry and Fred Pye, 3iQ is a fully-regulated Canadian multi-asset cryptocurrency investment fund that provides accredited investors with exposure to digital assets such as Bitcoin, Ether, and Litecoin through its 3iQ Global Cryptoasset Fund.$203 million2020
Altana Digital Currency Fund
ADCF uses long and short strategies in an effort to outperform the markets. The firm was founded by Alistair Milne, an entrepreneur and investor, and Lee Robinson, an entrepreneur.
$23 million2010
Alphabit FundThis crypto hedge fund seeks to generate capital appreciation while reducing risk. On the website, the fund states that “our goal is to generate our clients more Bitcoin than they started with. Not only that, we do it whilst generating lower volatility than that exhibited by Bitcoin itself.” The company is lead by CEO Liam Robertson, who has both a CFA (Chartered Financial Analyst) and the CAIA designation (Chartered Alternative Investment Analyst).$25 million2017
AltaIR Capital
AltaIR Capital is an Israel-based venture capital fund that was founded in 2010 to focus on investments in the technology sector. The fund invests in startups covering FinTech, InsurTech, Blockchain, SaaS, MedTech, AI, Cyber, and Consumer Internet and has made several blockchain investments in recent years such as REGA Risk Sharing.
$400 million2010
Galaxy Digital Capital ManagementThe New York-based investment firm is focused on digital assets and blockchain technology. The firm harnesses a hybrid hedge fund/VC fund model to achieve its desired results. It was founded by Michael Novogratz, who previously worked for Fortress Investment Group.$446.302018
1confirmation is an investment fund founded by Nick Tomaino with backing from Peter Thiel, Marc Andreessen, and Mark Cuban that invests in blockchain startups and digital tokens. Investments have included BTC, ETH, BAT, MakerDAO and Augur.
$50-100 million2017
Polychain CapitalPolychain Capital, founded by Olaf Carlson-Wee, the first employee at Coinbase, seeks to provide its investors with “exceptional” returns through active management strategies. The fund invests in digital currencies and not companies.$744.2 million2016
Pantera Bitcoin Fund
This fund announced in July 2018 that it had generated a lifetime return of more than 10,000%, after fees and expenses, since opening in July 2013. (Source: Pantera Capital Medium Post). The fund’s lifetime return surpassed 25,000% in December 2017, according to a New York Times Article.
$810 million2013
*data sourced from https://www.bitcoinmarketjournal.com/cryptocurrency-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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