As an asset class, Bitcoin has gained a lot of retail interest, but when it comes to the big money, institutional investors haven’t had the opportunity to really participate. But that’s not because Wall Street isn’t interested.
“There is not a hedge fund or institutional investor that doesn’t have Bitcoin on their white board. They know about it, they’re thinking about it. Some even have it in their personal accounts,” explained Matthew Roszak, an investor from Tally Capital. “But in order for them to jump in the water, they need tools that they are more used to.”
There is a perfect storm brewing with respect to Bitcoin and Wall Street. The Winklevoss twins intend to launch an exchange-traded fund [ETF] this spring under the ticker COIN. Barry Silbert’s GBTC gained Financial Industry Regulatory Authority (FINRA) approval that would allow holders of the shares to trade them on public markets. Alumni from J.P. Morgan, Goldman Sachs, and other banks are quickly moving into companies that primarily deal with bitcoin.
Despite this, much institutional money has sat on the sidelines for fear of loss assets — Mt.Gox was only a year ago — and significant amounts of uncertainty pertaining to legality and scams. Further, as an asset, bitcoin is worth around $3 billion. That’s not a lot when talking about big, institutional money.
That could finally be changing.
Noble Markets is a venture-backed company looking to work with Bitcoin exchanges to provide further liquidity. John Betts, the CEO, has worked at Goldman Sachs, Morgan Stanley, and UBS as the head of development of electronic trading platforms. The pedigree Noble Markets brings to the table could further ease concerns by institutional investors.
“The proximity between the two [Wall Street and Bitcoin] is starting to narrow. All the plumbing that is typically there in other asset classes between trading and clearing and security and domicile, liquidity – all of those form factors that are abundant in other asset classes. The plumbing for that vis-à-vis bitcoin is starting to be built,” explained Roszak, a board member for Noble Markets.
Large investors need to know that their assets are secure, that there is liquidity if they need to quickly open or exit a position, and that there is actually profit to be made. Right now, the exchanges show that there is money, but what’s lacking is the volume. By connecting with exchanges, Noble Markets will be able to help these institutional investors get in and out of bitcoin with far more certainty. While Noble Markets will be primarily for institutional investors, Roszak did say that the exchange “certainly won’t scoff at individuals, but it won’t be what Coinbase is doing.”
If institutional investors do move into bitcoin, it could significantly increase liquidity and decrease the overall volatility. With more volume trading each day, the acts of one or a few have a smaller impact on the overall price of an asset. In the past 24 hours, 550 thousand bitcoin were traded across the world, while on an average day, there are 58 million shares of Apple traded.
While Roszak did not want to provide a hard date, Noble Markets is aiming for a launch in the third quarter.
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