Financial Institutions Swarming into the Crypto Game

The first half of 2021 has been undoubtedly eventful for cryptocurrency. The market has seen drastic ups and downs in just a few months. Such violent volatility has attracted a huge number of institutional and individual investors.

Fazzaco has published an article recapping the performance of several major cryptocurrencies in the first six months of this year​.

If you are a crypto trader, it must be a tough half-year for your heart. It seems that the market has never had a peaceful day since the beginning of the year. Bitcoin price skyrocketed to its historical peak, surpassing 60 K US dollars in mid April; Dogecoin soared up by 80% in simply 24 hours after it became a meme on the internet. Then, Elon Musk, the boss of Tesla, ended his romantic affair with Bitcoin by denouncing the acceptance of the coin in May, and the massive crackdown against crypto mining in China took place in the same month. People were witnessing the nosedive of several cryptocurrencies from their peak point.

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A conclusion of the financial institutes claiming / planning to enter the cryptocurrency market is provided hereafter.

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In early May, Citi Group said it was weighing up the launch of crypto services to respond to the rising interest of clients. Meanwhile, investment bank Goldman Sachs has officially set up a cryptocurrency trading team. In addition, there were sayings that others such as Morgan Stanley, BNY Mellon and Deutsche Bank have either entered the market or have had plans too.

In late May, Saxo Markets announced the launch of trading services with three cryptocurrencies: Bitcoin, Ethereum and Litecoin, enabling traders to trade crypto and other assets from a single margin account.

In early June, Interactive Brokers revealed that it will launch cryptocurrency trading within its platform by the end of the summer, according to its chairman and CEO Thomas Peterffy. At present, there is no news on official launch of such services by Interactive Brokers yet. But Thomas Peterffy, the CEO, has admitted that he has made some investment in cryptocurrency personally in a recent interview, saying "you have to play the odds."

​In late June, BBVA, a Spanish financial group, announced that it will launch a new cryptoasset offering in Switzerland to complement investment offering available in traditional financial assets for Private Banking clients.

Also, Fazzaco learned that TP ICAP, the largest interdealer broker, has partnered with Fidelity Digital Asset, Standard Chartered's Zodia Custody and Flow Traders to roll out cryptocurrency spot trading services for institutions.

In early July, Dukascopy, a Swiss-based online and mobile trading services platform, is expanding its range of crypto instruments for traders, including new pairs of Bitcoin Cash vs US Dollar (BCH/USD) and Stellar vs US Dollar (XLM/USD) on JForex LIVE environment of Dukascopy Bank and Dukascopy Europe.

Also in July, Bank of America (BOFA), the second largest banking institution in the US, was reported to have created a new team dedicated to researching cryptocurrencies, according to an internal memo. A spokeswoman for the bank confirmed the contents of the memo.

eToro has relaunched cryptocurrency services in the Netherlands, enabling Netherlands-based traders to invest in real crypto in the same month. The online broker currently offers users in Netherlands access to 23 cryptos for its clients.

In July 22, Payment giant PayPal announced on Thursday that it has increased purchase limits for crypto on its platform to offer customers more choice and flexibility in purchasing crypto.

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Violent price fluctuations have always been one of the features that define Bitcoin throughout its 13-year development. Market participants, however, have always been expecting better liquidity and reinforced infrastructure, which would soothe the fluctuations that have adverse impact on network connections.

This year, in particular, people have built up higher expectations for cryptocurrency, believing that it could hedge against inflation and become a dominant payment in the future. Consequently, a large number of retail investors swarmed into the crypto market.

Brokers are launching services for this asset class due to massive investment demand. It is a good news for fintech firms, and providers of crypto liquidity.

Violent volatility has always been a well-marked feature of cryptocurrency. Whoever manages to maintain network connectivity, build premium liquidity pool of high effectiveness amidst the violent market volatility, who will stand out from the crypto fever.

A market responds late but always acts fast. It took over a decade for cryptocurrency to become a major asset class from a nameless instrument. Now the demand is built up, brokers are reacting to it swiftly. In just a few months after the cryptocurrency climaxed, a slew of brokers have launched their crypto products.

Now, it's the turn for fintech and liquidity firms.

An increasing number of brokers are stepping into the game of digital asset, so how would they connect themselves to better connectivity? How to help them boost up profitability in a low-leverage yet highly volatile market?

With the huge size of currency market and the flash crash of Swiss Franc, we now have tiered liquidity market such as PB and PoP. So, will there be another different ecosystem shaped by cryptocurrency?

Only time will tell us.