https://www.cnbc.com/2018/05/15/coinbase-bets-big-on-institutional-investors.html
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U.S. cryptocurrency exchange Coinbase is focusing on a group that has been
especially cautious to dive into the volatile market: institutional investors.
The
San Francisco-based company announced the launch on Tuesday of four new
products aimed at that investor class: Coinbase Custody, Coinbase Markets, The
Coinbase Institutional Coverage Group and Coinbase Prime.
"We
think this can unlock $10 billion of institutional investor money sitting on
the sideline," said Adam White, vice president and general manager.
"We're seeing a rapid increase in attention awareness and adoption in the
cryptocurrency market."
While
bitcoin's 1,300 percent rise to almost $20,000 in 2017 was led by retail
investors, the new products could usher in more institutional investors and
solve the problems that made many of them wary of the space, White said.
Security
is one of those issues. Fiat money stored in banks is insured but in
cryptocurrency, funds that are lost or stolen have little or no possibility of
recovery. Coinbase is looking to be the trusted custodian by launching Coinbase
Custody.
The
company has already stored more than $20 billion in cryptocurrency on behalf of
customers through its exchange but until the announcement did not have a
separate product to handle that. Coinbase Custody is a partnership with a
SEC-regulated broker-dealer that will store cryptocurrency for its clients.
Wall
Street's interest in cryptocurrency seems to be increasing. There are currently
245 crypto hedge funds, up from 175 in a year earlier, according to the latest
data from Autonomous Next. Only 20 hedge funds for cryptocurrency existed in
2016. Goldman Sachs is reportedly looking to open a cryptocurrency trading
desk, and White said others will be quick to follow.
"Very
few want to be first, but everyone wants to be second," he said.
"There will be fast followers."
The
6-year old company says it has traded $150 billion in assets on its platform
and has more than 20 million customers. Last year, it brought in a reported $1
billion in revenue, according to Recode, and has drawn in more than $225
million in funding from the world's top investors, including Andreessen
Horowitz, Union Square Ventures and the New York Stock Exchange. Recode also
reported that the company valued itself at about $8 billion when it made an
offer in its recent acquisition for Earn.com.
Coinbase
is best-known for its trading platform, which offers bitcoin, bitcoin cash,
ethereum and litecoin. It's now offering a separate platform exclusively for
institutional investors called Coinbase Prime.
"The
feedback we heard from institutional investors was 'Your infrastructure doesn't
meet our expectations,'" White said. "We heard that loud and
clear."
The
new platform will have a separate interface from Coinbase's GDAX exchange but
all investors will have access to the same pool of liquidity.
Coinbase
Markets is the company's new electronic marketplace, which will be run out of
an office opening in Chicago. It provides a centralized pool of liquidity for
all of the company's products.
The
fourth product, Coinbase Institutional Coverage Group, was designed for
"white glove" customer service that institutions like banks are used
to. The group will be run out of the New York City office, and will help bring
on board new clients and sell the service to additional investors looking to
get into crypto.
"This
is our public demonstration [that] we are absolutely here to serve institutions
investing heavily to do that," White said.