With the increasing interest of endowments, pension, hedge and mutual funds in cryptocurrencies this year, cryptocurrency wallet firm Blockchain has announced a new service for the institutional investors. Blockchain Principal Strategies, the institutional platform will enable institutions and family offices to have access to market.
The buyers will be provided with an over-the-counter trading desk which will be operating as ‘matchmaker and direct counter party to clients, executing trades and managing associated risk’. Apart from this clients of the agency will also be offered managed investment offerings and this will include access to vetted early stage token offerings.
Clients will possibly be provided with the opportunity of making direct equity investments in promising startups. Breanne Madigan, Institutional Sales and Strategy head at Blockchain stated:
…we will also offer educational and networking opportunities with hopes of creating a broader, well-informed community around digital currencies moving forward,”
The new Blockchain product aims at institutional buyers builds on the momentum that has been visible in the recent past.Insurance coverage funds, mutual funds, endowments and foundations, sovereign wealth funds and pension funds management roughly $131 trillion of the wealth on the earth, reveals the analysis performed by Willis Towers Watson.
There is likelihood that the entry of large buyers within the crypto-market may support in legitimising digital assets as a whole. Ari Paul, the present chief funding officer of BlockTower Capital, a cryptocurrency funding agency, and a former University of Chicago portfolio supervisor informed CNBC in April :
Even a small dollar amount is legitimizing. If that happens, every family office says, ‘Oh, Yale’s in. That gives us the excuse.
Inspite of the growing interest of institutional investors in cryptocurrencies, it is said that they are under-allocated particularly with regards to Bitcoin. Jim Kyung-Soo Liew, assistant professor at the John Hopkins University Carey Business School wrote a research paper last year and Levar Hewlett, a Maryland State Retirement and Pension System quantitative risk management associate, appealed since Bitcoin was uncorrelated to other asset classes or investments, it was a good way for big investors to diversify their portfolio.
Liew and Hewlett wrote :
We argue that the institutional investor should seriously consider cryptocurrencies for inclusion into their portfolios at the 1-2% allocation range … Although this market is relatively small, with less than $300 billion in market capitalization and has many other weaknesses that investors must take into full account, we believe in the long run that the early institutional adopters will benefit
The research paper highlighted that despite the excessive price volatility that Bitcoin experiences institutional investors stood to gain from a ‘higher Sharpe Ratio’ relative to any traditional asset class.