A hedge fund manager, Kyle Samani, is currently heralding a paradigm shift in cryptocurrency investing, supposedly caused by more explicit custodianship rules. This comes as the global cryptocurrency cap sits at around $275 billion, and an influx of institutional investors will be sure to increase this substantially.
Although some are expressing concerns regarding the general lack of regulation in relation to cryptocurrencies, Samani argues that institutional investors could flood to the cryptocurrency marketing as soon as more clear guidelines about custodianship are established.
”There are a lot of investors where custodianship was the final barrier”, Samani said in an interview with Bloomberg. ”Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital”.
It would seem that this influx of capital has already started, as the global financial services group Nomura has launched an institutional-level custody service handling cryptocurrency assets, and this follows an acquisition by BitGo of the $12 billion asset manager Kingdom Trust earlier this year.
Although some regard the lack of custodianship as one of the more attractive notions of the cryptocurrency sector, the opinions still serve to safeguard investments – something which is particularly important when it comes to institutional investments.
Institutional investors – sometimes referred to as ”whales” – can use regulated custody services to hold significant positions on the stock market and asset exchanges, without having personal custody and responsibility for the funds.
However, the availability of such options in the cryptocurrency sector is currently severely limited. As a result, cryptocurrency traders are forced to deal with significant risk if they want to undertake institutional-grade cryptocurrency trading.
Moreover, the few available custody services come at a hefty price. Coinbase currently charges $100,000 and ten basis points per month for organizing a custody service, and also requires a minimum balance of $10 million. The funds are also held in cold storage, and take up to two days to remove due to the security protocols that need to be followed.
It would also seem as if there might be some credence to Samani’s comments. Wall Street behemoths such as JPMorgan, the Bank of New York, Northern Trust and many more have previously revealed that they are exploring cryptocurrency-related endeavors and expanding into the area.
It will no doubt be interesting to watch the cryptocurrency industry over the coming year, to see whether Samani’s prediction comes true or not. As regulations begin to improve and cryptocurrency guidelines become more plentiful and appropriate, this may also help boost the adoption of cryptocurrency.
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Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.