Fidelity May Face an Uphill Battle to Attract Institutional Crypto InvestorsOctober 30, 2018
Expanding the reach and appeal of cryptocurrencies remains difficult. Institutional investors are considered to be the “holy grail” to rekindle interest in Bitcoin and altcoins. Fidelity Investments is entering this market, albeit without too much fanfare. Analysts expect this company’s impact to be minimal.
Fidelity Investments and Cryptocurrency
The decision by Fidelity investments to tap into cryptocurrencies makes sense. It appears that the demand for exposure to these volatile assets remains high. Institutional traders have few convenient access points for Bitcoin and altcoins. A major player on the level of Fidelity can make the cryptocurrency industry go through a revival of sorts.
That will only happen if the firm’s customers are interested in this option. That may be a bigger problem than originally anticipated. Investing in Bitcoin remains a very risky venture, similar to other investment opportunities. Traders seem concerned over the higher chance of losing their money in the process. Cryptocurrencies are far more volatile compared to traditional investment offerings.
The cryptocurrency industry invokes a major trust issue. Bitcoin has no active regulation in the United States and most other countries. As such, investors and traders remain wary when it comes to this new asset class. Without trust, there will be no increased interest in cryptocurrencies. Building that trust can take months, if not years. Until a solid foundation is established, Fidelity investments may not see any real success in this department.
The Importance of Institutional Products
One also has to wonder if institutional traders are such a big market for cryptocurrencies. Other institutional-grade products currently struggle for traction as well. Bitcoin futures contracts are an one such example. These options are not in high demand, with overall trading volumes remaining relatively small. This is despite a much lower Bitcoin price compared to January of 2018.
No one will deny institutional traders are curious about cryptocurrencies. That is a healthy sign for the industry as a whole. Pension funds and asset managers seem to be leading the charge in this regard. Turning that curiosity into actual investments, though, is a different matter altogether. Such a process will, according to some analysts, not materialize anytime in the near future.
Addressing key concerns pertaining to cryptocurrency will be the main priority. Ensuring funds are safe at all times remains a major concern It is possible institutional traders won’t get on board until an existing financial service provider develops advanced custody solutions. Fidelity Investments offers a custody service, but it remains unclear if the firm can convince traders in the near future.
What do you think it will take to make institutional investors get serious about investing in the crypto market? Let us know in the comments below.
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