Fidelity starts trading and handling cryptocurrencies for institutional investors

In October ChainRift Research reported that Fidelity, one of the world’s largest and most reputable financial service firms, was launching a new company, Fidelity Digital Assets, to offer custody and trade services for cryptocurrencies to institutional investors. We noted that this move could have a big impact on cryptocurrency markets.

Now, Fidelity Digital Assets is beginning to gradually roll out its services for hedge funds, family offices, pensions, endowments, and other institutional investors, the company announced last week with a tweet:

The January post referenced in the tweet provides some more information:

“We are currently serving a select set of eligible clients as we continue to build our initial solutions. We’ve established a robust set of technical and operational standards at a level that institutions have come to expect from Fidelity.”

In October we emphasized that Fidelity Digital Assets doesn’t offer sophisticated financial products, like futures or other derivatives, vaguely pegged to bitcoin or another cryptocurrency, but the real thing. Fidelity Digital Assets is likely to bring increased capital influx and trading volumes to cryptocurrency markets, and its consulting services can be expected to be better than average at picking winners.

According to Nasdaq, “the importance of this development to the cryptocurrency markets cannot be overstated.”

“Until now, cryptos have mainly attracted individuals — small traders, blockchain tech geeks, and other early adopters — and while that was enough to build the industry and power its initial growth, it cannot sustain the current array of cryptocurrencies for the long term. Only the large-scale cash infusions of the big institutions can do that.”

At the DC Blockchain Summit, Tom Jessop, head of Fidelity Digital Assets, told CNBC that there’s long-term interest from institutional investors to add some form of cryptocurrency to their portfolios. Fidelity Digital Assets will handle trades on multiple exchanges and safe storage of digital assets for these professional investors.

Jessop added that many institutional investors are still in “wait and see” mode when it comes to putting money into crypto. Much of that hesitation has to do with volatility, but at some point, “there will be an attractive entry point.”

Needless to say, the January announcement invites institutional investors to caution:

“Digital assets are speculative and highly volatile, can become illiquid at any time, and are for investors with a high risk tolerance. Investors in digital assets could lose the entire value of their investment.”

Cover picture from Eugene Kim/Flickr.