Fidelity to Launch Crypto Custody and Brokerage Solutions for Institutional Investors

On Monday (15 October 2018), Fidelity Investments, one of the world’s largest financial services providers with more than $7.2 trillion in client assets, announced the launch of a new company, Fidelity Digital Asset Services, which will offer "enterprise-quality custody and trade execution services" for cryptocurrencies to institutional investors (such as "hedge funds, family offices and market intermediaries"). These new services are expected to be available in 2019.

Abigail P. Johnson, Chairman and CEO of Fidelity Investments, had this to say about the new company being launched today:

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”

And Tom Jessop, head of Fidelity Digital Assets, stated:

“We started exploring blockchain and digital assets several years ago, and those efforts have been successful in helping us understand and advance our thinking around cryptocurrencies. The creation of Fidelity Digital Assets is the first step in a long-term vision to create a full-service enterprise-grade platform for digital assets.”

In its press release, Fidelity says that although there are many solutions servicing the needs of retail crypto investors, there is a shortage of institutional-grade solutions. It says that although "Greenwich Associates found that 70 percent of institutional finance executives believe cryptocurrencies will have a place in the future of the industry", many institutions "are waiting on the sidelines to enter this market." 

It also says that in the most recent edition of its "Fidelity Global Institutional Investor Survey", it found that "70 percent of institutional investors said that new asset classes will likely emerge because of advancing technologies, such as blockchain." Fidelity expects institutional investors (such as hedge funds) think about entering to enter the crypto markets for various reasons, such as "the rising popularity as a store of value or relative non-correlation to the broader market, the potential to power lower-cost global payments, or the emergence of protocols that could power new industries."

Fidelity Digital Assets plans to offer:

  • Institutional-Grade Custody of Digital Assets. This means: "a secure, compliant, and institutional-grade omnibus storage solution for bitcoin, ether and other digital assets" and consists of "vaulted cold storage, multi-level physical and cyber controls."
  • Trade Execution. Here, it "will leverage a proven internal crossing engine and smart order router for trade execution of digital assets"; this "smart order router will allow for execution at multiple market venues."
  • Dedicated Client Service. Clients will have "access to a dedicated team of client service specialists, from onboarding throughout the entire relationship with the company."

Jessop says:

"In our conversations with institutions, they tell us that in order to engage with digital assets in a meaningful way, they need a trusted platform provider to enter this space. These institutions require a sophisticated level of service and security, equal to the experience they’re used to when trading stocks or bonds. With Fidelity Digital Assets, we’re building a scalable infrastructure for digital assets that meets the expectations of what it means to work with Fidelity, while leveraging unique capabilities of the blockchain to create a completely new offering."

Hunter Horsely, co-founder and CEO at Bitwise Asset Management, called this announcement "a huge moment for the crypto space":


Featured Image Courtesy of Fidelity Investments

Top-Tier Crypto Exchanges' Volumes Climb Back to One-Third of Total Market Share

The aggregate trading volume of top-tier cryptocurrency exchanges has increased by 61.2% during the month of January, while the volume of lower-tier crypto exchanges increased 46.4%.

According to CryptoCompare’s January 2020 Exchange Review, the trading volume of top-tier crypto exchanges – those rated AA-B according to its Exchange Benchmark – climbed last month to represent 29.3% of the total trading volume in the space.

The rise is significant as in December, the cryptoasset data provider’s report showed top-tier cryptocurrency exchanges were seeing their trading volumes drop as they lost market share to lower-tier crypto exchanges, those rated C-F. At the time, they represented 26.4% of the cryptocurrency market’s total trading volume.

top tier trading volumesSource: CryptoCompare Exchange Review

The report further found that exchanges that charge taker fees represented 76% of the total volume last month, while those that implement the controversial trans-fee mining (TFM) model represented 22%.

It also found that regulated bitcoin derivatives are still dominated by the CME, whose total trading volumes went up 145.6% since December. Grayscale’s Bitcoin Trust product (GBTC) saw its total trading volume rise 131% since December.

As for derivatives trading on cryptocurrency exchanges, in January OKEx represented the majority of daily derivatives volumes, trading $4.96 billion per day and capturing 31.1% of the total market share. Huobi traded $4.29 billion a day for 26.9% of it, while BitMEX traded $3.13 billion for 19.6%.

Pure crypto-to-crypto exchanges notably represented 75.4% of the market’s trading volume, in a similar proportion to the last two months. The stablecoin space, per the report, is still dominated by Tether’s USDT, as it still represents 94% of the total Bitcoin trading volume into the top four stablecoins.

Decentralized Exchanges Lose Trading Volume

CryptoCompare’s report also addresses decentralized cryptocurrency exchanges, noting IDEX was the largest one in January. It traded a total of $10 million as its trading volume went up 25.4%, and it was followed by Switcheo and Bitsquare. While these platforms’ volumes went up, DEXs as a whole have been losing volume.

dex CHARTSource: CryptoCompare Exchange Review

According to the report they have diminished 88% since early 2019 to now represent a small fraction of the global spot exchange volume. In January, decentralized trading platform traded $17.8 million in total, representing 0.003% of the market. In January 2019, for comparison, they traded $148 million.

Featured image via Unsplash.