Our ‘Diversifying to Crypto’ panel at last month’s iFX EXPO Asia 2019 addressed the challenges facing institutional investors hoping to transition to crypto in the coming year.
Finance Magnates Senior FX Editor Victor Golovtchenko spoke with several industry experts who confirmed that, despite falling prices and stagnant liquidity, institutional interest remained strong, pending adoption of crypto exchange custody safeguards.
According to the panel, brokers want to offer leverage and the ability to short, which makes cash products less desirable, and the crash of ICOs has also led to traders to abandon physical tokens. Traditional liquidity providers are now taking on market making in the crypto market, with a major differentiator being whether the liquidity provider will take on the counterparty risk.
Liquidity provider B2C2‘s CEO Phill Gillespie laid part of the blame for the recent crypto slump at the feet of the retail segment. He explained that decentralized tokens were originally designed to be held in client wallets, as opposed to being traded on exchanges. Unfortunately, many inexperienced traders lacked the education to properly manage portfolios without robust exchange custody solutions. Gillespie said that “in order for this market to grow, we need people to understand what they’re dealing with.”
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However, as more institutional investors enter the market, maintaining liquidity for this asset class will depend on the availability of safe, secure storage backed by economical insurance. Currently, there is no single product capable of fully protecting assets. So, for the moment, exchange custody will rely upon an integrated system which combines technology with appropriate segregation.
In terms of upcoming asset trends, crypto CFDs were chosen as the consensus pick because both brokers and exchanges benefit from offering them. The CFD funding rate is very competitive, with double-digit funding possible in crypto, and brokers can use these options to give clients needing diversification an added value service. Meanwhile, the exchanges holding physical tokens rely upon broker volumes to create market movement.
The panel continues to see greater investment in institutional infrastructure. This includes robust white label software that’s auditable and compliant, and the development of CFD broker wallets to better handle crypto exchange custody. Jasper Lee, Managing Director of major broker eToro, confirmed that the brokerage plans to debut a crypto exchange focused on tokenized assets like stablecoin this year. Lee said that the current bearish market would be a good time to clean the market, and that with “professional players coming in, the security already improved significantly.”
We invite you to read our previous articles in the iFX EXPO Asia 2019 recap series and learn more about our sessions covering institutional crypto trading, ESME industry moves, or algo trading and prediction tools.
You can also visit the official iFX EXPO YouTube channel to review all of the insights shared by the speakers during our iFX EXPO Asia 2019 sessions.