An increasing number of hedge funds are investing in blockchain and cryptocurrency assets.
London-based cryptocurrency trading platform Pure Digital has drawn investment from one of the world’s largest financial institutions. The Bank of New York Mellon has joined a variety of other major banks behind the launch of the new cryptocurrency exchange, allowing users to trade Bitcoin and other digital tokens.
Not only this, but crypto derivatives exchange FTX raised $900 million in fundraising, taking the value of the company to $18 billion. The move makes FTX one of the main competitors to industry leaders like Coinbase and Binance, who hold a large global share of aspiring crypto investors.
What does this mean for FTX?
With FTX’s 1 million users already averaging more than $10 billion in daily trading volume, the plan will be to bring in more users and build on the strong foundations the company boasts.
At present, much like many other popular crypto exchanges, the demographic and type of investors vary greatly. FTX's range of users includes experienced day traders, crypto newcomers, and institutional traders. There is a lot of work to be done to catch the likes of Binance, but with a team of hedge fund managers behind it, FTX stands a very good chance.
Hedge Funds participation is positive for the industry
The ownership of blockchain technologies from mainstream international businesses only seeks to bolden the ever-growing popularity and name of crypto in the face of the public. A big part of the development of the industry is finding a way to convince the doubters as to the value and potential of digital currency.
The volatility of the market and the fact the cryptocurrency market is in a major slump right now don’t help matters. The cryptocurrency market was worth over $2 trillion around Easter this year, with the overall value significantly lower today.
While Bitcoin is still up 2% for the year, the drop in price will be concerning for many investors. The backing of hedge funds will help to reinstill confidence in those that are concerned about the market price.
The concerns regarding state banks have always been about the loss of power. However, both commercial and central banks are working with crypto fintech companies to try and provide a better service to customers, allowing customers to spend with both cryptocurrencies and fiat currencies—it will be interesting to see how things continue to develop this year.