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Fidelity’s Crypto-Winning Strategy

Fidelity Investments is the nation’s largest mutual fund provider, with $2.5 trillion in assets under management. The company, which was formed seven decades ago, is run by CEO Abby Johnson, who is the third generation of her family to lead it. However, as detailed in a recent Bloomberg piece quoting persons familiar with the topic, Fidelity has recently been everything but cautious when it comes to Bitcoin.

According to an earlier Investopedia report, the Boston-based corporation stepped ahead of its competitors last October by launching Fidelity Digital Assets, which will provide custodian services to crypto investors with offline, cold storage custody solutions, trade execution, and other services. According to a source familiar with the situation, Fidelity is upping the ante – and increasing its risk – by planning to purchase and sell Bitcoin, the world’s most popular digital asset, for institutional customers within the next few weeks.

A FORAY INTO CRYPTOCURRENCY BY AN INVESTMENT GIANT

Fidelity launches Fidelity Digital Assets LLC in mid-October 2018.
Fidelity issued a new study on May 2, 2019 that highlights institutional investors’ increased interest in digital assets.
May 6, 2019: In a few weeks, a financial behemoth will begin trading bitcoin for institutional investors. Bloomberg quotes sources familiar with the situation.
Bloomberg, Investopedia
Institutional clients are the target market for Fidelity Digital Asset Trading.
Fidelity would join a small group of companies that offer cryptocurrency trading to clients, including E*Trade Financial Corp. (ETFC) and Robinhood, a no-fee trading app. According to Bloomberg’s anonymous source, Fidelity’s crypto products would solely target institutional customers, not individual investors, as do platforms E*trade and millennial-favorite Robinhood.

Fidelity Investments appeared to make a move earlier this week when it released a significant study showing a lot of interest from institutions in digital currencies. Nearly half of institutional investors believe that digital assets are worth having in a portfolio, according to a report issued on May 2. About 22% of the more than 400 institutional investors polled had some digital asset exposure, the majority of which had occurred in the last three years. And that number is only expected to rise. Over the next five years, about 40% of respondents said they would consider investing in digital assets.

In an email, Fidelity spokesperson Arlene Roberts stated, “We now have a small set of clients we’re supporting on our platform.” “Over the following weeks and months, we will continue to roll out our services based on our clients’ needs, jurisdictions, and other considerations.” Our service is currently focused on Bitcoin.”

In the crypto world, there are certain challenges.

Despite the positive results of Fidelity’s recent study, the firm still confronts significant problems in the uncertain market. Cryptocurrency trading is still a dangerous frontier. First and foremost, while digital assets have made a comeback in recent months, they are still in a bear market. Despite rising nearly to the same degree over the past three months, Bitcoin, the world’s largest digital currency by market capitalization, is down over 70% from its high hit in December 2017 at the height of the crypto-frenzy.

Meanwhile, several smaller players have gone out of business, and charges of fraud, market manipulation, and a high-profile New York attorney general inquiry into a major crypto exchange operator have harmed the industry’s fight for credibility. Fidelity isn’t used to operating in this kind of new region, full with uncertainty.

Aiming Forward

While there is a lot of uncertainty about the future of digital currency, Fidelity’s choice to invest further in the volatile market shows that the dangers haven’t deterred institutional investors. Tom Jessop, the founder of Fidelity Digital Assets, stated in an earlier Investopedia article that the formation of the business arm was a “knowledge that there is institutional demand for these assets as a class.” Family offices, hedge funds, and other sophisticated investors are beginning to consider this market seriously.”

What do you think?

Written by Trevanna Gordon

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