More Investors Headed Toward the Cryptocurrency Market
Wall Street companies have not yet made any substantial investments in the highly volatile cryptocurrencies. The more than $382 billion invested in the cryptocurrency market is primarily by individual investors. Moreover, as BitMEX CEO Arthur Hayes confirmed is that the majority of the investments in digital currencies is by retail investors, not institutional. Notably, this is expected to change as Hayes also confirmed in a May 14th interview with CNBC.
More recently on May 18th, Adam White, VP and General Manager at cryptocurrency exchange Coinbase informed Fortune’s journalists that regulators have now gained a better understanding of what cryptocurrencies are. He addressed the fact that there are a large number of requests by users to list/support more digital currencies on Coinbase. This suggests that more investments are definitely going to be pouring in – not only into the evolving digital currency market, but also into crypto and blockchain-related startups that support it.
Despite the overwhelming number of requests by users to list their favorite coins/tokens, Adam pointed to their stringent selection criteria for listing coins as outlined in their medium post. This appears to be a similar approach that Binance uses in order to ensure quality control.
Big Step For The Crypto Industry
In response to digital asset exchange Gemini adding support for Zcash, the executive said that it was a “big step for the industry” because regulatory authorities are now finally beginning to wrap their heads around how zk-SNARKs works. Also, he mentioned that Coinbase is set to establish another office in Chicago, which will be an “engineering office.” To start, Adam said there will be only 6-7 employees, however, the office will “scale” to “upwards of over a 100 employees over the coming years.”
Notably, Coinbase will mostly be hiring engineers for their Chicago-based operations in order to create an “institutional-grade infrastructure” to further help grow their suite of products. One of the main things that Coinbase will be looking to provide to institutional investors, as Adam stressed, is a platform where they can “safely and securely store cryptocurrencies.” The general manager acknowledged the large number of hacks that had occurred in the crypto realm over the years and that this is a major problem that needs to be addressed more seriously.
In reference to Coinbase’s planned Chicago operations, Adam pointed to the windy city’s “deep exchange architecture” such as the CME and Cboe, both of which have been offering Bitcoin futures contracts since December 2017. Presumably, the exchange will look to take advantage of Chicago’s derivatives markets in addition to its overall well-established financial infrastructure.
The Google of Crypto
GDAX, Coinbase’s “institutional-grade exchange”, will now reportedly offer Coinbase Prime. The use of the word “prime” is to highlight that the exchange will provide:
“the prime brokerage services that institutions are missing [such as] lending, algorithmic orders, access to market data, and even research one day.”
Fortune’s senior writer Jen Wieczner, who was one of the journalists interviewing Adam, remarked that “a lot” of what the exchange was planning to do sounds like “banking services.” Jen also noted that Goldman Sachs would be trading Bitcoin derivatives and perhaps even Bitcoin (BTC) itself in the future. So, the experienced writer wanted to know what exactly Coinbase was trying to become. In response, Adam said, “we want to be the Google of crypto.”
Again, Adam stated the importance of “safety” and how to securely store and trade digital currencies. However, he explained that simply focusing on security-related issues was not a sound long-term strategy. What needs to also be done in the executive’s opinion is for the exchange to move into the “utility phase”, which means developing and supporting more real-world use cases for cryptocurrencies. To lead the exchange into this direction, the company has begun investing into products that could help provide solutions to real-world requirements.
For instance, Coinbase now offers a new wallet called Toshi which Adam explains is a decentralized application allowing for various crypto-related services. Then, there’s Coinbase Commerce which is more suited for businesses to transact in digital currencies. So, according to Adam, the exchange does not consider itself as “just a crypto bank” although that’s an important aspect of what Coinbase intends to be. Also, the VP emphasized the need for his company to provide more utility-oriented solutions.
Money “Sitting on the Sidelines”
Reportedly, there are billions of dollars in potential investments from institutional investors “sitting on the sidelines.” And this is not just a conservative estimate, according to Adam, but also only accounts for “just a safe custodianship product.” Also, the exchange must provide excellent customer services along with high-end products in order to remain competitive and relevant, the VP said.
While nobody can accurately predict what the future holds, it is safe to say that Bitcoin and other cryptocurrencies are not going to go away. They’re neither a bubble, like Alibaba founder and billionaire Jack Ma has ignorantly stated, nor are they a fad. Despite all these positive developments in the cryptosphere, we will probably still continue to hear about all the uninformed and ridiculous things people say. For instance, Dr. Amit Lakhanpal, author of “The World of Cryptocurrency”, has said: “In a year or two, cryptocurrencies will lose their credibility.” It appears that Dr. Amit is quite far removed from reality just like those other gentleman at Berkshire Hathaway.