Coinbase Custody: $1 Billion in Assets Under Management Just 12 Months After Launch

Brian Armstrong, CEO at Coinbase, one of the largest cryptoasset trading platforms, has revealed that Coinbase Custody now has approximately $1 billion in assets under management (AUM).

All Assets Are Regulated, Insured, Subjected To Internal Evaluations

On May 6th, 2019, Coinbase’s management revealed that Coinbase Custody has added more than 20 different cryptocurrencies to its platform (so far this year). In addition to providing support for a wide range of cryptos, Coinbase’s team aims to “offer a safe, regulated and insured storage platform for all the assets [its] clients request and that pass [its] internal evaluations.”

Launched on May 15th, 2018, Coinbase Custody has been adding an average of around “$150 million AUM a month” and 70 institutional clients have registered (so far) to use the exchange operator’s digital asset custodial solution. This, according to Armstrong, whose comments came during an on-stage discussion at Coindesk’s Consensus 2019 event, held on May 15th, 2019.

Armstrong mentioned that institutional investors are also looking for cryptocurrency services such as “staking and voting, [and] doing governance on-chain.” Expressing views that are similar to many other blockchain industry participants, Armstrong believes proof-of-stake (PoS)-based cryptocurrencies will be widely used as their adoption rate is “growing rapidly.”

While most institutional clients are primarily interested in Bitcoin-related investments, Armstrong said that investors are now also more open to investing in other digital assets.

First Custodian To Provide OTC Trading “Directly From Cold Storage”

During the first of this year, Coinbase Custody has been integrating new features and support and it also became “the first institutional-grade, qualified custodian” to provide staking services for cryptoassets held in cold storage (offline). Coinbase Custody is also one of the first platforms to offer over-the-counter (OTC) trading “directly from cold storage.”

Only Around 200 Institutions Are “All In” On Crypto “So Far”

According to Fred Wilson, a partner at Union Square Ventures: “The token funds and venture funds will make up the first two big institutional funds. For them [traditional institutions] to take their chips and go all in, I don’t see that in the next year or two.”

He also mentioned:

When people read in the Wall Street Journal that institutions are coming to crypto, they think Goldman is coming, but in reality, maybe 100 token funds in the US and 100 in Asia are all in so far.

Notably, Armstrong revealed that 60% of Coinbase’s “trading volume” now comes from institutions.

He added:

I would love to be in a world where people could self-custody … and still participate in exchanges, we’re talking to people at StarkWare about that.

Interestingly, Armstrong has also acknowledged that Coinbase is becoming increasingly centralized and that the exchange is “a victim of [its own] success.”

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com