'All hell will break loose': 1 in 5 Financial Firms Ready to Trade Cryptocurrencies
• Thomson Reuters survey concludes 20% of 400 financial firms surveyed are considering launching cryptocurrency trading operations in next 12 months
• Although currently a niche market in mainstream finance, interest in crypto has been steadily rising, and establishment of mainstream crypto trading could support price growth
• Goldman Sachs recently hired a new head of digital asset markets, and is considering launching a crypto trading desk
Financial firms ready to establish crypto trading operations
According to an industry poll conducted by Thomson Reuters, 20 percent of financial firms are looking to get involved with cryptocurrency in the next year – and that’s likely just the start.
Interest in cryptocurrencies surged in the second half of 2017, as the price of bitcoin rose to US$20k and received widespread media coverage. The mainstream interest culminated in the launch of bitcoin futures by CME and CBOE in December 2017. However, these products have been thinly traded, and institutional interest still remains a niche concern.
Currently, there are over 220 cryptocurrency-focused hedge funds globally, according to fintech research from Autonomous Next, however their combined assets under management only total $5 billion at most.
As put by Neill Penney, the co-head of trading at Thomson Reuters:
"Cryptocurrency is still a relatively small part of the trading market, but this survey makes clear this niche segment is starting to enter the mainstream of the financial services industry. This is a major change from a year ago."
The crypto market has stalled since the start of the year, falling from $800bn to $400bn in market capitalization, hampered by a slew of regulatory attacks. Many crypto bulls believe that this potential influx of institutional money could spur the recovery of the markets, as we head into the second half of 2018.
Bill Barhydt, the CEO of American Express-backed cryptocurrency startup Abra, told Business Insider last month:
“I talk to hedge funds, high net worth individuals, even commodity speculators. They look at the volatility in the crypto markets and they see it as a huge opportunity. Once that happens, all hell will break loose.”
Goldman Sachs makes its first crypto hire, as it explores a potential crypto trading desk
Thomson Reuters’ survey results come after Goldman Sachs announced the appointment of former trader Justin Schmidt as head of digital asset markets, as the firm explores the option of launching a crypto trading desk tentatively scheduled for the end of June.
Schmidt holds previous experience as both a Senior VP at Seven Eight Capital, and Portfolio Manager at LMR Partners and has apparently been hired due to increased interest in cryptocurrency from Goldman Sachs’s clients. As said by Goldman’s spokeswoman Tiffany Galvin-Cohen:
”In response to the client interest in various digital products, we are exploring how best to serve them in the space. At this point, we have not reached a conclusion on the scope of our digital asset offering.”
The increased interest from Goldman’s clients marks a wider increase in interest in cryptocurrencies among Wall Street firms – where many were late to the party when last year’s bull run occurred. Don’t expect them to miss the boat this time.
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