Crypto Custody Services Are Booming.
And it has the biggest room in the world: The room for improvement.
(August 14, 2020) — This 2020, as have been predicted by many, there was a noticeable growth in institutional investment into the cryptocurrency market. One attribute may be the fact that the coronavirus pandemic has already crippled many national economies, others to the brink of recession. Central banks almost in unison are printing and printing their own currencies in an aim to balance their delicate ailing markets, which in turn are further devaluing their monies. Institutional investors are making drastic moves to protect their assets.
Take the case of the United States of America. The Federal Reserve has recently printed over $3 trillion and done so to offset the impact of Covid-19 by driving down interests and encourage borrowing and lending to revive the economy. The incurring dollar devaluation would be hard to ignore among traditional institutions that are now hard-pressed to hedge their funds to safer havens to avoid the bleed.
A billion-dollar US company, Microstrategy, Inc. has purchased $250 million in bitcoin, adopting the cryptocurrency as its primary treasury reserve, saying that the cryptocurrency is a dependable store of value superior to the cash.
Former staunch crypto critics cannot help but change their minds as their hedging movement into cryptocurrencies will support the narrative of cryptocurrencies becoming fully an asset class of its own.
The Digital Gold Rush.
To legitimize our claim that indeed there is a digital gold rush, a recent Fidelity Investments survey revealed some interesting results taken from respondents from over 400 pensions, hedge funds, financial advisors, endowments, and foundations, of which, among them:
- 22% are exposed to digital assets one way or the other.
- 40% are open to making crypto investments over the next five years.
- 72% are interested in buying investment products that hold digital assets.
- 57% are going to buy crypto assets directly
- 57% would like to acquire an investment product that holds digital asset companies.
- 47% would be investing in digital assets due to their low correlation to other assets.
This survey strongly suggested a consensus among governments and institutional investors that cryptocurrencies are defining itself into an asset class worth investing in.
The Crucial Role of Custody.
The impending digital gold rush among institutional investors are sure to drive the need for safe and secure crypto custody services. Meanwhile, traditional financial institutions are trying their best to diversify their existing services into more digitized applications including crypto custody, as their relationships with these institutional investors are deeply established and their sizeable spreadsheet offers secure hedging. They are, in fact, avoiding a mass exodus. Headlines contain from time to time a fiat institution starting to accept crypto accounts. But digitizing can be that challenging and costly. Fintech custody companies are giving them a run for their money as their core digital structure is in place for the smooth transfer, storage, and management of assets.
The Choice not to be Complacent.
The field of digital asset custody are now being scrutinized carefully by window-shopping traditional investors. Fintech custody is out to be shaken by the massive influence of centralized third-party custodians if some inherent issues are not met with convincing solutions. Although already a turf of retail investors, institutional investment does carry a variety of instruments whose unique characters present need to be addressed. Amongst are mutual funds, financial entities, and fund managers. Custody services, therefore, among fintech companies must be improved as traditional banks are opting partnership with fintech custody services rather than offering crypto services themselves.
The Issue of Decentralization.
Governments and legacy institutions have long been key players in the controlling world of centralization. Theirs are for the protection of the consuming public that is why the need for central banks to flood or limit the market with the necessary fiat to maintain an economic balance and to keep their currency stable. Robust regulations oversee these are in place. The issue of decentralizing their assets need careful study and calculating measures as inevitable changes in major socio-political structures entrenched as they are can become hotly debated topics in legislative halls. Digital asset custody must fare well in contrast to the tried and tested centralized custodians.
The Issue of Volatility and Liquidity.
Another issue of concern is the volatility of cryptocurrencies. The more stable ones can be looked up to by the size of their market capitalization. The entry of institutional investment will greatly lend to the stability of digital assets and the built trust will rend wild market swings to a stabilizing stop. Trading features are beneficial to stored assets to increase its value. Therefore, its liquidity must be ensured.
The Issue of Security.
The millions of digital asset losses due to fraud, scams, theft, and hacks and the reputation of being the playground for money laundering activities and terror financing have made cryptocurrencies such hardly a convincing material for hedging and storage. But through the years, the learning curve brought corrective measures that hold to this day and newer innovations are contributing to more secure custody features. More cryptographic security steps are being implemented to keep assets tightly safe and secure.
Opportunities continue to abound despite the birth pangs the cryptocurrency market and the underlying blockchain technology have experienced in the past and will continue to do so. Its disruptive power is positioned to offset the collapsing might of the fiat and what it is doing to world economies. And it might, after all, become the saving grace we are waiting for to unshackle corruptive systems, devaluations, and inflations that keep on wielding their ugly horns. A healthy and efficient fintech custody service is key to this impending transition.
eQapital is a Fintech company that answers your queries regarding custody of your assets, whether physical, digital, or fiat. These trying times are uncertain. Secure your assets the eQapital way. Call now.