TP ICAP and Fidelity are launching a crypto exchange for big players – a sign that institutional interest is sticking

Bitcoin logo mining hand person
Bitcoin shot up in the first months of 2021 before tumbling in May.

  • TP ICAP is launching a crypto exchange aimed at big players such as hedge funds and investment banks.
  • The major financial broker has teamed up with Fidelity and Standard Chartered-backed Zodia Custody.
  • It is a sign that institutional interest in bitcoin and crypto is sticking, despite the fall in prices.
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Market infrastructure company TP ICAP is launching a cryptocurrency exchange aimed at investment banks, hedge funds and other financial institutions, in a sign that big players are still keen on digital assets despite the recent plunge in prices.

Fidelity Digital Assets and Zodia Custody, which was launched by Standard Chartered, have also backed the project and will provide custody services, the companies said Tuesday.

“Client demand to trade spot crypto assets is significant and growing,” said Simon Forster, co-head of digital assets at TP ICAP, cited in the companies’ announcement. “But to date many of our clients have been prevented from accessing crypto asset markets due to current limitations in market infrastructure.”

It is a sign that major players in financial markets remain interested in crypto assets, despite bitcoin’s slide from close to $65,000 in May to around $35,660 on Tuesday.

Institutional investors are put off by the design of crypto exchanges where trading and storage are done in the same place, TP ICAP said.

It hopes its new crypto-trading platform will appeal to big players by giving them access to liquid trading in bitcoin, ether and other crypto tokens, as well as storage for their assets at separate custodians.

TP ICAP, a global company that facilitates transactions between financial institutions, said the trading platform will be made available to its customers around the world. It will aim to provide the market standards and trading infrastructure viewed as a minimum in traditional markets, it said.

Fidelity sees the joint effort as key to bringing more big players on board with crypto assets. “Collaborating with industry leaders like TP ICAP to bring to market innovative solutions that strengthen the digital assets ecosystem is critical to enabling even more institutional participation,” said Chris Tyrer, head of Fidelity Digital Assets in Europe.

The new platform has already started to onboard customers, but its operation is subject to approval by the Financial Conduct Authority in the UK, where TP ICAP is based.

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Bitcoin is still driven by the ‘digital gold narrative’ among institutional clients who see it as a hedge against inflation, Fidelity’s digital assets president says

bitcoin vs gold 3

  • Institutional investment in bitcoin is still driven by the “digital gold” narrative, according to Tom Jessop.
  • Jessop, Fidelity’s digital assets president, said his clients are worried about monetary inflation and see bitcoin as a hedge.
  • Bitcoin is also viewed as a “long-dated call option on the use of the asset or the technology as a means of payment.”
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Bitcoin is still driven by the “digital gold narrative” among institutional investors who see the digital asset as a way to hedge against inflation, according to Tom Jessop, Fidelity’s digital assets president.

In an interview with CNBC on Tuesday, Jessop was asked which narrative surrounding bitcoin is the most popular with institutional investors.

The digital assets president said: “I would say the predominant narrative at this point is still the digital gold narrative which really started driving the market higher about a year ago after the pandemic.”

He added: “There are a number of clients that are concerned about the fiscal and monetary stimulus, monetary inflation, and they see a scarce digital asset like bitcoin, specifically, being an important part of that thesis.”

Bitcoin’s scarcity and potential to hedge against inflation are key reasons institutions are taking an interest in the asset, according to Fidelity’s digital assets president, but they aren’t the only ones.

In his interview, Jessop explained how a growing number of institutional investors are looking at bitcoin “from an asset allocation standpoint” due to its lack of correlation with other assets over longer periods of time.

Jessop also said that bitcoin is seen as a “network effect opportunity” by some institutional clients. He explained that a portion of his clientele views the digital asset as a “long-dated call option on the use of the asset or the technology as a means of payment.”

Fidelity’s digital assets president went on to say that he believes bitcoin’s recent boom and bust cycles “are part of the maturation of bitcoin as an asset class.”

Jessop also echoed comments from other crypto analysts who have called bitcoin’s recent fall a result of massive leverage unwinding.

“In some cases, we touched close to $30 billion of leverage driving prices higher, and in many cases, these investors can trade on 50 to 100 times leverageā€¦in the subsequent weeks that leverage has come down significantly, in some cases by two thirds,” Jessop said.

The digital assets president added that this de-leveraging process can be viewed as a “cleansing” for the ecosystem and that he expects with “basing” and “positive news flow,” bitcoin and other cryptocurrencies will begin to stabilize.

Read more: Financial researcher Nik Bhatia explains why asset managers with a growth focus could be violating their fiduciary duty if they don’t consider bitcoin – and compares the crypto to Amazon’s stock 20 years ago

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