Fidelity officially enters cryptocurrency. We’re happy to announce that Fidelity Digital Assets has rolled out its cryptocurrency custody and trade execution operations. The current bear market has not deterred Fidelity from aggressively offering cryptocurrency products.
Tom Jessop, the head of Fidelity Digital Assets, remarked how the collapse in cryptocurrency prices “haven’t had an impact” on their company. “If you started a crypto fund at the height of the market you’re probably hurting right now.”
Bitcoin and other cryptocurrencies went through a buying frenzy in late 2017, with Bitcoin rising to nearly $20,000. Prices have gone dramatically down since their highs, with Bitcoin trading near $3,790 on Friday.
Jessop confirmed that long term interest exists from institutional investors. There are two factors that appeal to investors about cryptocurrencies – first, they see it as a store of value in a crisis, and second, the volatility of the market is a trading opportunity.
Fidelity did some research to gauge this interest. They interviewed about 450 institutions, from wealthy families to hedge funds, pensions, and endowments. About 22% of the respondents already owned cryptocurrency.
Those that already own it expect to double their allocation over five years.
“If anything, they are as encouraged now as they were when prices were higher,” Jessop said.
Among those that already own it, they expect to double their allocation over the next five years.
Fidelity Digital Assets will execute trades on multiple exchanges for their investors. They will also handle custody. There is yet to be a big US based company that handles custody for cryptocurrency.
Jessop said while the company is live, certain aspects are still a work in progress. Fidelity will be expanding the coverage of where it can and cannot do business. Its offerings are not a proper fit for all states. Some customers have been using their services since January – other won’t be able to use it until later this month. More still may have to wait until September.
“It really depends on the facts and circumstances of each client,” Jessop said. Fidelity is a 72 year old family controlled firm. They’re best known for managing retirement plans and mutual funds. But Fidelity has been aggressively spending and investing in artificial intelligence and blockchain. Fidelity Digital Assets was born out of the FCAT, Fidelity Center for Applied Technology.
Jessop said many institutional investors are still in “wait and see” mode when it comes to putting money into crypto.
“At some point, there will be an attractive entry point,” Jessop said. “But by the same token people don’t want to be early even if we’re well off the highs.”
A majority of that hesitation stems from the volatility. It’s quite common for an asset to move +-10% in a single day. While prices have remained stable for most of 2019, institutions are still wary of sudden price jerks.
Volatility will be solved once the market matures, Jessop said. Education is another big obstacle before greater adoption by investors and the regular public. The more educated they are on the topic, the more likely they’d be willing to invest in cryptocurrency.
“They’ve approached us wanting to learn, which is an encouraging sign,” Jessop said. “That’s not to say that there’s a cohort of people that once they get educated will still have a negative view.”
What do you think? We’ve been waiting for Fidelity to enter the markets for quite some time. Do you think the markets will respond positively or negatively based on this news? Let us know what you think on our Facebook Page!