Fidelity’s Strategy to Win in the Wild Crypto World

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Fidelity’s Strategy to Win in the Wild Crypto World

Fidelity Investments is the biggest mutual fund business in the United States, with $2.5 trillion in assets under management. The business, formed seven decades ago, has traditionally been a tradition-bound corporation, and CEO Abby Johnson, the third generation of her family to be at the helm, is the third generation of her family to serve at the helm. However, according to a recent Bloomberg piece quoting individuals familiar with the topic, Fidelity has been everything but cautious when it comes to bitcoin.

Last fall, the Boston-based firm forged ahead of its competitors by establishing Fidelity Digital Assets, which will provide custodian services to cryptocurrency investors through offline, cold storage custody solutions, trade execution, and other services, as detailed in an earlier Investopedia story. According to a source familiar with the situation, Fidelity is raising the ante – and increasing its risk – with plans to purchase and sell Bitcoin, the world’s most popular digital asset, for institutional clients within the next few weeks.

Investment Giant’s Foray Into Cryptocurrency

  • Fidelity Digital Assets LLC is established in mid-October 2018.
  • Fidelity issued a new report on May 2, 2019, showcasing institutional investors’ increased interest in digital assets.
  • May 6, 2019: According to Bloomberg, a financial behemoth is preparing to begin trading bitcoin for institutional investors within the next two weeks.

Source: Investopedia, Bloomberg

Fidelity Digital Asset Trading Targets Institutional Clients

Fidelity would join a small group of companies that provide cryptocurrency trading to its customers, including brokerage E*Trade Financial Corp. (ETFC) and no-fee trading app Robinhood. According to Bloomberg’s unnamed source, Fidelity’s crypto products would solely target institutional consumers, rather than ordinary investors, as do platforms E*trade and millennial-favorite Robinhood.

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Fidelity seemed to hint its intention earlier this week when it published a big poll revealing a surge in institutional interest in digital currency. According to the May 2 research, over half of institutional investors believe that digital assets are worth having in a portfolio. Out of almost 400 institutional investors polled, around 22% already had some exposure to digital assets, with the bulk of them made during the last three years. And that figure is only expected to rise. Approximately 40% of respondents showed an interest in future investments in digital assets during the next five years.

“We now serve a limited number of customers on our platform,” stated Fidelity spokesperson Arlene Roberts in an email. “In the following weeks and months, we will continue to roll out our services depending on our customers’ requirements, jurisdictions, and other considerations.” Our current service offering is centered on Bitcoin.”

Headwinds in Crypto World

Despite the positive findings of Fidelity’s latest poll, the business still confronts significant problems in the unpredictable market. Today, cryptocurrency trading is still a dangerous frontier. To begin with, although digital assets have made a rebound in recent months, they are still in a severe bear market. Bitcoin, the world’s biggest digital currency by market value, is down more than 70% from its peak in December 2017 at the height of the crypto-frenzy, despite recovering almost as much in the last three months.

Meanwhile, several smaller firms have gone out of business, and charges of fraud, market manipulation, and a high-profile New York attorney general inquiry involving a major cryptocurrency exchange operator have harmed the industry’s struggle for credibility. This new region, fraught with uncertainty, is not the kind of climate in which Fidelity is used to working.

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Looking Ahead

While there is great uncertainty about the future of digital currency, Fidelity’s move to venture further into the volatile market shows that dangers have done nothing to dampen institutional investors’ rising appetite. As previously stated in an Investopedia article, Tom Jessop, the founding head of Fidelity Digital Assets, said that the formation of the commercial arm was a “realization that there is institutional demand for digital assets as a class.” Family offices, hedge funds, and other sophisticated investors are beginning to take this market seriously.”

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