What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact way in retrospect in our weekly review.
Over the past few months, increased institutional interest in Bitcoin became evident. This has also been noticed by Wall Street. Accordingly, a number of financial institutions are preparing for a larger adoption of crypto assets. Evaluations of the new digital asset class are being made and services are being defined. As one of the largest financial services providers, Citibank has published a detailed report on Bitcoin this week. The review is based on a series of interviews with CEOs and professionals from leading custodians, exchanges, infrastructure providers and asset management firms. The report covers not only Bitcoin's origins, but also its potential. The Citi authors describe an "inflection point" for the largest cryptocurrency. This could result in mass adoption - or a speculative implosion. In fact, the bank sees a good chance for the first case. It recognizes Bitcoin's role as a store of value, a digital payment system, and a backbone for decentralized financial transactions with the potential to become a global trading currency in the future.
Back in 2018, Goldman Sachs opened a trading desk for Bitcoin and other digital assets. However, after the crash in December 2017, the interest evaporated and the investment bank stopped the activities. As a result, the Wall Street institution called Bitcoin an "unsuitable asset class" and branded the cryptocurrency as an "unsuitable investment." Now, the institution is doing a U-turn and will offer cryptocurrency trading and derivatives services under its "Digital Assets" division. The reopening comes amid growing institutional interest in bitcoin, which has helped send the cryptocurrency's price surging 460% in the past 12 months.
While the major Swiss banks continue to exercise restraint when it comes to the new world of digital assets, local private banks are expanding their range of services related to digital currencies. One example is the long-established private bank Märki Baumann. The wealth manager has been dealing with digital assets such as bitcoin for a while now, and clients can already trade cryptocurrencies and let the bank hold them in safekeeping. Now, the offering will be expanded with an investment advisory service for digital assets, based on the FIDLEG and MiFID compliance guidelines. The decision of the private bank follows an elevated demand for advice in dealing with the new asset class.
Potential crypto investors continue to shy away from the volatility that digital currencies carry. Bitcoin's price rise is undoubtedly attractive, but the price fluctuations are far beyond the risk profile of traditional asset managers. According to James Butterfill, investment strategist at crypto company CoinShares, this occurrence comes naturally when a new asset class is born. In a study, Butterfill examines Bitcoin's initial volatility and compares it to other more established assets such as gold. In fact, strong parallels can be observed between the two asset classes, and since Bitcoin's emergence, its volatility has already decreased significantly. Butterfill expects similar volatility levels to other asset classes as early as 2025.
Moreover, with the increasing demand for digital assets, the blockchain ecosystem in the Crypto Valley could also record considerable growth despite Corona. At the beginning of the Corona crisis, observers still feared that it would develop into a "Death Valley". These forecasts have been impressively disproved. Both the number of companies and the total number of employees have increased in the last six months, as documented in the latest CV VC Top 50 report. Together with its robust blockchain legislation, the Swiss financial center seems to be asserting itself as the heart of the ecosystem.
Selected articles in the weekly review:
Financial services provider Citibank takes a look at Bitcoin and the world of digital assets.
Investment bank Goldman Sachs will reopen its crypto trading desk. The decision follows growing interest in Bitcoin and digital assets.
The integration of digital assets into the traditional financial world continues to grow. Swiss Private Bank Maerki Baumann is now expanding its crypto strategy with an investment advisory service for Bitcoin & Co.
Potential Bitcoin investors are often deterred by its high volatility. However, this occurrence is a typical pattern of a maturing new asset class. James Butterfill examines the extent of Bitcoin volatility and draws parallels to established asset classes.
The Crypto Valley is in robust shape despite COVID-19. The latest CV VC Top 50 Report reveals remarkable growth figures achieved by companies from the blockchain and crypto assets sector.
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