Guest Contributor: David Wills, COO and Co Founder of Caspian
The mainstream media are too quick to jump on any slight price correction when it comes to cryptocurrencies. With prolonged bearish trends, article after article proclaims the death of Bitcoin and other cryptos. The fact is, this could not be further from the truth. Bear trends are a time for building infrastructure. The price may shake speculators, but serious parties are in it for the long haul.
Consider, if you will, the case of Polychain Capital – making headlines earlier in the year when it was announced that the fund held more than $1 billion in crypto-assets, managed by a limited partners list comprised of legacy finance heavyweights from Sequoia, Andreessen Horowitz and Union Square Ventures, to name a few. Polychain’s involvement in the space should be an excellent indicator as to the determination of major players to institutionalise the emerging asset that is cryptocurrency.
Unsurprisingly, a lack of regulatory cohesion on the classification of cryptocurrency has been one of the major deterrents to existing financial institutions – not only is clear guidance sparse (due, of course, to the nascency of the field), but it also varies wildly from jurisdiction to jurisdiction. That’s not to say it isn’t there; by far one of the most valuable sets of entities to have materialised are those that are able to make sense of it all, advising funds on how to navigate jurisdictions and their regulations (take, for instance, firms like Fundplatform or Bluemeg).
Another element to consider is one that has garnered significant attention in the past year, more so than any year prior: that of custodianship of crypto-assets. Traditionally, the technical know-how required in interacting with cryptocurrencies has been seen as a considerable barrier to entry for investors, both at the retail and institutional levels – a degree of knowledge is required not only to purchase these, but to ensure that they remain secure and impervious to compromise.
There’s been an unprecedented push for Bitcoin ETFs as of late, which would allow investors to trade the asset, whilst leaving technical deliberation to the custodians themselves. Insofar as peace of mind is concerned, investors could invest in Bitcoin, much as they’d invest in traditional financial instruments.
Coinbase, perhaps one of the best-known names in the budding industry (as the largest crypto-exchange), is leading the charge in the domain of custodianship. It holds $20 billion worth of assets, and anticipates that its recently launched custody business will have attracted 100 large institutional investors by year’s end, further taking an estimated $5 billion into its hands. Coinbase may be the most ambitious in regards to its volume, but it’s by no means the only player seeking to penetrate the institutional playing field – long-standing businesses like BitGo and Gemini are actively working to integrate their own solutions for securely holding users’ funds.
The misconception that bear markets result in the total meltdown of the broadening crypto industry is false. If anything, they improve the quality of discussion and work being done, shifting away from price commentary to focus on building the tools that will pervade long after what can only be minor price fluctuations. Psychological and regulatory limitations on the growth of institutional adoption are slowly ebbing away as investors begin to educate themselves (and gain access to a range of services that will assist them in doing so) and legislation begins to adapt to reflect the growing interest in the area. Crypto is here to stay, regardless of the state of the market.
About The Author
David Wills is Caspian’s COO and Co Founder. He has served as Kenetic COO since inception. Prior to that David spent 10 years as Managing Director and Head of Asia Trading at Och-Ziff Capital and was the former chairperson of HKeX Hedge Fund market council. David holds a B.A. in Psychology and B.Comm. in Finance & Economics from the University of Sydney
Caspian is a full-stack crypto asset management platform tying together the biggest crypto exchanges in a single interface, so as to facilitate investments in crypto instruments for newcomers and veterans alike. The joint venture between heavyweights Tora and Kenetic brings to the table a wealth of experience in asset management, accumulated over decades of building and operating trading platforms and technologies.