As you may have seen, Fidelity Investments announced yesterday that it will store and trade bitcoin for hedge funds and other professional investors via Fidelity digital assets, becoming one of the first Wall Street companies to break into this space.
Huhnsik Chung, partner at Stroock & Stroock & Lavan LLP:
“Fidelity Investment’s announcement that it will store and trade bitcoin for hedge funds and other professional investors in Fidelity Digital Assets, a first among the well-known Wall Street financial institutions, is a significant step for the digital asset class in gaining acceptance as an alternative investment option. There are significant hurdles in the providing of custody and trading services for BTC from a regulatory and risk perspective in light of licensure requirements and hacking risks for hot wallets and trading platforms. These hurdles have delayed the development and proliferation of services that will now be offered by Fidelity Digital Assets.
This offering appears to be a response to the growing market demand that hedge funds and professional investors have been looking for to create a custody solution for digital assets which exist in the cloud with a key providing access and possession.
The lack of such services has stifled the growth of the digital asset class. The entry of Fidelity Digital Assets lends creditability to this asset class and is a step toward acceptance of digital assets which will likely increase trading volume and reduce volatility as long as this trend continues. This will also likely create greater liquidity in this asset class. It is the lack of such services and the regulatory opaqueness which has had an impact on BTC pricing. ETH, likewise, which had been the fuel for ICOs, has lost 91% of its value from its peak earlier this year.
The entry of hedge funds and professional investors in trading of BTC, which is a base value of all other crypto-currencies, reflects a greater acceptance of digital assets and will likely be viewed by the crypto-currency community as an indicia of the trend towards mainstream acceptance of BTC.”