According to banking behemoth State Street, global asset managers are unfazed by the ongoing cryptocurrency “winter.” In what has been nicknamed a “crypto-winter,” the prices of cryptocurrencies have fallen on the back of interest rate increases. In fact, Bitcoin has depreciated by more than 50% since January.
However, the sudden influx of new financial products tied to the cryptocurrency boom would suggest that established participants are counting on the asset class to endure.
Irfan Ahmad, the Asia-Pacific Digital Lead for the bank’s cryptocurrency arm State Street Digital, stressed that despite the market’s significant volatility in June and July. In an interview he said,
“During the June, July period where things were hotting up in terms of activity, we saw institutional clients not necessarily double down, but they weren’t deterred from placing strategic bets on the asset class itself.”
The Cboe Australia exchange listed three cryptocurrency exchange-traded funds (ETFs) from Cosmos Asset Management and 21Shares in May. Meanwhile, asset manager Monochrome has just received approval to introduce the nation’s first spot crypto-ETF with an Australian financial services license in August.
The majority of Australian financial institutions have avoided cryptocurrencies because they consider them to be too hazardous, except the Commonwealth Bank. It last year unveiled a crypto-investment pilot that has since encountered regulatory hurdles.
However, a few global juggernauts are investing in digital currencies. Last month, investment titan BlackRock unveiled a product that allows institutional clients exposure to Bitcoin, while Goldman Sachs introduced its first bitcoin-backed loan.
Ahmad referred to Goldman’s actions and predicted that additional significant institutional players would likely enter the cryptocurrency market in the future. He said,
“Certainly, our clients, they’ve been speaking to us more pragmatically about how they might be able to launch products, or what our capabilities may be in the future to help them support the launch of those products.”
The Cosmos Purpose Bitcoin Access ETF’s fund administrator is State Street, and Ahmad told the SMH that additional cryptocurrency product launches are coming to Australia in the “very near future.
Analysts in the field claim that the most recent fall in the Bitcoin market is not a problem unique to one industry. The situation around digital tokens has become tumultuous as a result of the decline in all financial markets.
Due to the volatility of the cryptocurrency markets, buying cryptocurrencies at any price, much less one that might become a long-term trend, is risky. Prices may decline more, leaving your investment in the red, or they may return to where they were.
Co-founder of the automated cryptocurrency trading platform Coinrule thinks that the same economic factors that are hurting other economic sectors are to blame for the price decrease in cryptocurrencies.
“It’s not just crypto that’s down, everything is down, and over the next 6-12 months the economic outlook is bad. Central Banks are between a rock and a hard place about slow economic growth and high inflation. So, investors are escaping ‘risk-on’ assets like crypto and tech stocks.”