On the exchange side, we have Bakkt
, and Seed CX
that have raised rounds to launch futures products for cryptocurrencies. Getting CFTC approval is key for these, yet the government shutdown earlier this year has delayed launches. On the custodial side, Anchorage
, and Coinbase
have launched with strong tech and licenses. Support for ERC20 tokens, brand, and insurance will be key. On the trade execution/portfolio management side, Tagomi
, and Lumina
have simplified access to best-priced trading and management of cryptocurrencies. Setting up exchange accounts, going through multiple KYC processes, and trading can be friction for family offices and institutional investors.
I think it will take a bit of time before institutional investors come into the space in a big way but the companies tackling important infrastructure above should be ready for when that will happen with a focus on product, brand, and customer support. Regulatory compliance and licensing provide a moat. Same conclusion with security tokens and institutional capital.
Institutional investors are starting to realize that cryptocurrencies and blockchain technologies are here to stay, seeing this space as an alternative asset class and portfolio diversification. Why not invest less than 1% of AUM with high upside? Yale endowment invested into Paradigm
and the police pension fund invested into Morgan Creek
. Last week, Cambridge Associates issued a report
that the blockchain industry is developing, not faltering, and that institutional investors should being exploring it.
I believe that relationships and brand matter quite a bit for institutional investors to become LPs but more are eager than ever to get educated and explore a potential investment into this asset class.