Why Fintech Institutions Suddenly Becoming Interested in Cryptoassets

In today’s world institutions across various industries are suddenly betting their money on crypto assets. In light of the current surge in bitcoin, we can see that there’s a tremendous demand for this digital currency.

Infact, a study conducted by Fidelity report states that over 800 institutional investors currently own about 36% of crypto assets. Also, a survey carried out by the company Evertas shows that the rise in the hedge funds will substantially increase their hold on crypto assets.

From companies like Microstrategy to JPMorgan, Bitcoin, one of the most demanded currencies today has gained a stronghold. These fintech enterprises claim that the reason for investing in crypto assets such as bitcoin can help them to hedge against inflation and currency devaluation.

But, the real reason that these behemoth fintech institutions have started to invest in cryptocurrency is due to they believe the value of the currency will substantially increase in the future.

According to experts, these fintech institutions believe that holding BTC may be less risky than not having to hold Bitcoin at all. But the question lies in why these institutions are suddenly flocking towards Bitcoin and other cryptocurrencies that they have not seen before.

Cryptocurrencies blockchain technology and a borderless network

Since most cryptocurrencies are non-sovereign, they provide a diversification platform for institutional investors to hedge against highly correlated markets such as S&P, fiat currencies and Nasdaq.

Furthermore, bitcoin and blockchain technologies provide institutional investors to conduct borderless transactions which are secure while having access to opportunities that cannot exist in today’s financial markets.

Cryptocurrencies’ novel technology such as the inclusion of borderless payments, smart contracts as well as considerably lower fees as well as faster and even better secure transactions act as the catalyst for preparing for a future where national currencies will break away from their present physical root and become digitized.

The growing presence of quality custody solutions

Custodians are known to be utilized by financial institutions such as hedge funds and mutual funds. These custodians are responsible for holding their clients’ assets for regulatory purposes.

Due to skepticism and lack of regulatory environment in the crypto space, fintech institutions were wary of investing with cryptocurrencies.

Also, the ecosystem of institutional-grade crypto assets was lacking in their infrastructure. However, the surge in the number of crypto assets held by financial institutions coupled with clarity around the regulatory guidelines for operating as well as investing in cryptocurrencies gave birth to the institutional-grade custodian solutions.

The birth of quality custodian solutions also makes it mandatory for cryptocurrency exchange platforms to hold themselves to a higher standard. It is encouraging them to protect investors’ assets from theft or misappropriation.

The rise of institutional demand

According to a report from Zubr, a cryptocurrency derivatives platform, financial institutional investors are pivoting their focus toward holding cryptocurrencies such as Bitcoin in ‘physical’ form away from cash-settled futures. Thus, the adoption of crypto assets from both holders as well as institutions is a showcase that the transition will only become much smoother, strengthening the confidence in crypto assets.

The serving of both parties is also the upside which is brought by decentralized finance that has created a flow of business chains, products as well as services.

For example, services from the products such as Compound and Maker enable individuals to get loans within a fraction of time without having an obligation to reveal the details to a third-party. Furthermore, the gains associated with these new Defi products have resulted in higher gains for individuals when compared with the conventional options.

The introduction of blockchain technology has opened the floodgates for innovations that have a slim chance of closing if someone attempts to. The investments of mega institutions serve as a positive indicator that cryptocurrency has a promising day ahead where not only the mega giants but also the people can reap its benefits and also avoid the scenarios of financial crisis that have time-to-time have plagued human society.


Why Fintech Institutions Suddenly Becoming Interested in Cryptoassets was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.