Fidelity, Bakkt and Coinbase are the New Era of Institutional Wars
Fidelity Is Launching a Crypto Trading Platform.
This week it was announced that Fidelity Digital Asset Services, LLC will provide cryptocurrency custody and trading services for enterprise clients. It was a major announcement as they will likely compete with Coinbase and Bakkt as a digital asset discovery, trading and storage platform.
Fidelity is one of the five largest financial services providers in the world, maintaining some $7.2 trillion in client assets. What it marks is yet another big player entering the space where crypto is becoming more mainstream.
With an institutionally-oriented cryptocurrency outfit in the works it’s already announced that Galaxy Digital is among its clients. The first “alpha custody client” of Fidelity Digital Assets is a pretty big fish.
Fidelity Investments generally operates a brokerage firm, manages a large family of mutual funds, provides fund distribution and investment advice, retirement services, wealth management, securities execution and clearance and life insurance. That they have gotten into crypto could signal good things for a crypto renaissance and how we approach digital assets rapidly maturing at the end of 2018 and heading into 2019.
As others have pointed out, this basically means Fidelity has finally debunked the conversation on cryptocurrencies as instruments for criminals. Digital assets have a significant future in investing and we’ve been breaking down the trends. The race for institutional Crypto investors won’t be just between Coinbase and Bakkt now, Fidelity makes things far more interesting.
2019 will be the Year of the Institutional Crypto Investor
Crypto M&A has really progressed of late and a convergence appears to be taking place in which crypto is going mainstream and getting regulated to the point that the future of digital assets looks really bright. Fidelity has a reported 27 million customers so that could easily represent a massive potential influx of new fresh money being injected into the cryptomarket. How significant could Bakkt and Fidelity be? It could mean Coinbase will have some pretty serious challengers.
The Bitcoin ETF situation has a deadline of the 27th of February 2019 and by then the outlook for digital assets might be so good the SEC will likely have to get the ball rolling. The rise of crypto funds and the total number of blockchain and crypto-related deals have surged more than 200 percent at an annualized rate this year, according to data from PitchBook that was compiled by JMP Securities. So digital assets likely have a very positive outlook in 2019. The launch of Ethereum Futures by CBOE and others will help as well. An ETF for Bitcoin will simply mean an even easier access for traditional investors to cryptocurrencies.
Coinbase’s attempt to woo institutional investors means it could even be thinking of going IPO. Though with IPOs before 2020, expect Robinhood, Bitmain, Binance and many others in the crypto space to also consider it. This will mean significant new ties between Wall Street and the new era of digital assets.
Fidelity’s interest in Bitcoin goes back some ways. As far back as in 2015, the firm’s charity spin-off Fidelity Charitable began offering Bitcoin donations, a move which generated $69 million in 2017 alone. It’s all a question of timing. Now Fidelity has officially opened Wall Street’s first crypto trading desk.
A Battle Royale for Crypto is Coming
If Coinbase already has a reputation for being “the Stock Broker For Amateurs”, Fidelity certainly will help bigger investors into the digital assets markets. Robinhood and Circle both also have good optics for growth in popularizing investing in digital assets and crypto markets. “Zero commission” cryptocurrency trading platform Robinhood seems especially capable of being popular with Millennials and potentially stealing customers away from Coinbase. While Coinbase’s user count has eclipsed 20 million as of June 2018, that’s still at least seven million less than Fidelity. It’s also a different audience.
With each new entry into the field, the viability of digital assets becomes more foundational to the new wave of how younger consumers are choosing to invest. Q4 of 2018 is shaping up to be a time when Wall Street vets are getting their feet wet in crypto with the Intercontinental Exchange (Bakkt) and likely Citigroup and Goldman Sachs too. You can read the Fidelity’s press release here.
Fidelity’s goal will be to make digitally native assets such as bitcoin much more accessible to investors. They will start with BTC and ETH and likely rapidly expand, adding more altcoins in 2019. All of which will be sourced from large, over-the-counter digital exchanges and housed using cold storage to ensure customer funds consistently remain safe.
There’s no reason to think that Fidelity’s entry isn’t significant since it plans to build a “scalable infrastructure”, one that will take advantage of Fidelity’s existing experience in building such platforms. The institutional-grade custody launch will mean a dedicated client service with cold storage security and multi-level physical and cyber controls, which is reassuring. It will be most interesting to see what other altcoins Fidelity will launch in 2019 besides Bitcoin and Ethereum.
For more information on digital assets, feel free to reach out to WhitePark Capital at contact@whitepark.capital, and be sure to check out our website www.whitepark.capital
Follow us on Twitter at: @vshabanov_ @WhitePark
Disclaimer:
This article is an informational document and does not constitute an investment recommendation, investment advice, an offer to sell or a solicitation to purchase any assets or any entity organized, controlled, or managed by WhitePark Capital LLC (“WhitePark”) or any of its affiliates. This document is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations.
The views expressed in this article are the subjective views of WhitePark personnel, based on information which is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the information and opinions. The information contained in this letter is current as of the date indicated above. WhitePark does not undertake to update the information contained herein.
WhitePark and its principals haven’t made investments in some of the instruments discussed in this communication and may in the future make additional investments, including taking both long and short positions, in connection with such instruments without further notice.
It is strongly suggested that investors obtain independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that, if altered, can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure.
