Fidelity and Bakkt 2021: Institutional Cryptocurrency Investors

Data & Research / 15.01.2021

2020 was a very challenging year economically. Data points to a 4.4% shrinking of the global economy during this financial year, the worst such performance since the 1938 global depression. Due to the uncertainty, investors realized the importance of switching their funds into other assets such as precious metals and digital assets. 

Crypto’s performance bested that of gold, having grown by 65% vs. 20% of the latter from the start of 2020 to September. Fidelity and Baktt, key players bringing institutional money to crypto markets, have had a part to play in this. They may have a better 2021 in the making.

About the Two

Fidelity and Baktt are asset management providers with specialization in the crypto investment sphere. Being institutional crypto platforms, their clients come in sizes as big as MNCs, which brings about the possibility of huge investment sums to boost crypto features. They also offer improved security and the possibility of more widespread crypto adoption.

Fidelity

Fidelity is the crypto investment platform of its parent company, Fidelity Investments. Its holding firm is one of the largest investment management players globally, with about 28 million customers. The company has around $6.5 trillion in total customer assets with over $2.4 trillion in global assets under management.

The platform’s services are available exclusively for institutional clients, implying that retail investors cannot access its services. Fidelity assumes all the responsibilities regarding crypto investments for its users, ensuring stress-free crypto investments.

The firm ventured into the crypto sector even though the US government tightened legislative restrictions on crypto firms. The recent Ripple lawsuit by the SEC is the latest such indication of an increased regulatory environment.

Bakkt

Bakkt is the crypto trading platform for the Intercontinental exchange company. This is a fortune 500 company that operates 12 regulated exchanges, has clearinghouses and offers listings and mortgage clearing data. Unlike Fidelity, Bakkt’s services are available for both retail investors and institutional players in the crypto industry.

Its futures are formed in cash and Bitcoins, with Bitcoin settled futures having overtaken cash settlement ones by September 2020. This exchange trade funded (ETF) platform has collaborated with the tech giant Microsoft and the restaurant giant Starbucks to help roll out its service to as many people as possible.

2021 Roadmap

The two institutional crypto investment managers offer a more promising roadmap through the following strategies;

  • Increased Industry Consolidation

This year should experience continued increases in consolidation by the two firms in the crypto industry. Such steps serve the purpose of increasing service delivery capacity and market reach in the crypto industry.

Bakkt is in advanced talks for a potential merger with Victoria Park SPAC, a special purpose acquisition company. The transaction is estimated to top at $2 billion. SPAC aims to identify, partner with, and help expand a Fintech sector firm.

On the other hand, Fidelity has been trying to pump in investments into Bitcoin, a strategy that should go on through 2021. In August 2020, the president and director of Fidelity’s digital funds informed the SEC of creating a new Bitcoin dedicated fund.

  • More Transparent and Secure Investments in Crypto

Fidelity and Bakkt offer higher reliability transparency in the crypto industry, highly sought out by institutions. They do this through end to end regulated markets for transparent prices.

Bakkt offers physical delivery, overcoming the need for spot exchange or auction determined prices. The two price-setting techniques increase the probability of price manipulation. Fidelity offers to its clients a custodial investment term.

This means that institutional investors can reduce risks by carrying out crypto investments without holding cryptos by themselves. No beforehand knowledge on cryptos is also needed before carrying out investments in such a setting.

  • A Liquidity Boost

While Bakkt allows retail investors to access its services, the platform, together with Fidelity, is largely an institutional asset management service provider. They provide a link between big institutional money and crypto investments.

In particular, Fidelity has $6.5 trillion in customer assets that could be bridged with crypto investments. The crypto industry has had a huge bear run, with the total market cap rising by 65% in the first three quarters of 2020 alone. Cryptos are an attractive investment avenue, with the two bridging this attractive opportunity with the huge institutional asset pools.

  • Mass Adoption

The Covid 19 crisis placed a cap on the possibility of mass adoption of cryptos for use on a day to day expenditures. Bakkt’s partnership with Starbucks pointed towards the possibility of using cryptos to purchase a mug of coffee. 

It also partnered with Microsoft to effect crypto-based payments on tech. With vaccine rollouts in progress and economies projected to recover, 2021 may be the year this happens.

On the other hand, Fidelity’s business model promises the mass adoption of crypto trade by huge MNCs responsible for our day-to-day activities. It offers a chance for corporate-led mass adoption of crypto trading and investments.

Conclusion

While 2020 was a tough year economically, 2021 promises to be a year of recovery. Fidelity and Bakkt are gearing to make it even better through improved adoption of crypto across the board. The projected industry consolidation by the two points towards improved crypto investments.

Institutional crypto investors come with deep liquidity pools held by their institutional clients and a wide reach by their clients. Should institutional investors get on board with crypto adoption, a truly widespread mass crypto adoption will be made much easier. 2021 could thus be a good year for crypto, thanks to Fidelity and Bakkt.

Adam is an outgoing young lad who likes adventures and discovering new things. Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.