Reading Time: 7minutes 2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate […]
2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate about embracing new innovations and opportunities. We’ve finally seen real momentum from legacy tech and financial institutions — with Square, Microsoft, Fidelity, and Facebook all announcing their forays into this space. Two years after the last crypto bull market, it is undeniable that institutions and enterprises have arrived. But why now? What does this mean for the future?
“We’ve got blockchain”
At a high level, institutions are looking to get into blockchain for a few reasons: research and development, growth opportunities, and in many cases, FOMO. For many, they are conducting research and development to understand the technology and gain a perspective on the landscape at large. As more companies decide to experiment in the space, the competitive pressures increase dramatically as institutions seek to capture early growth and revenue opportunities and fend off disruptive risk. In addition, innovation within large corporations is an important component of talent retention as more talent is leaving their Wall Street and tech roles for crypto startups.
We are also witnessing a large, generational demographic shift in financial services. Financial institutions are currently serving aging customer populations, and in many cases struggling to capture the minds and wallet share of the younger, more tech savvy customers. In an effort to understand these demographics, cryptoassets are a trend to watch. There is major FOMO — no one wants to “miss the boat” on what could be a massive growth opportunity or ignore what could potentially present existential risk to their business model. This has led to both thoughtful analysis of the space and what some call “innovation theater “— a proof of concept for the sake of “doing blockchain” with little practical utility. As more institutions embrace the space, it results in a net positive for the industry. But the details matter as we move out of the pilot and POC phase to serious implementations, products, and services. And, as an industry it is important to encourage use cases that utilize the technology optimally rather than simply instituted a new internal database.
Who are these institutions?
The term institution is overly broad — in reality, we are seeing many types of companies enter the space. For the sake of simplicity, the table below categorizes primarily U.S. institutions and enterprises. It is not meant to be comprehensive, but more representative.
While we have an extensive list of players entering the space, they can’t be treated equally. Rather, the implications will either be far reaching or stay siloed as “innovation projects” within these organizations. In order to understand potential outcomes, we consider their existing customer base, market trends they face and risk tolerance. Lastly, an important component which is largely outside of the public purview, comes down to the talent inside these organizations and how they shape the internal views of the space.
Asset Allocators Who: Fund of funds, family offices, endowments, pension plans What: venture fund, hedge fund, and direct investments Examples: Stanford, MIT, Princeton
As crypto assets emerge as a new asset class, asset allocators have been forced to wrap their minds around the technology and space at large. Cambridge Associates recently published their report “Venture into the Unknown” where they evaluate crypto allocation strategies and recommend investors consider an allocation to digital assets. Their suggestion stems from the belief that blockchain investing can be likened to early internet investing, fraught with young, risky technologies that may end up spurring the next wave of capital inflows.
From the perspective of an asset allocator, exposure to the industry is beginning to play an important diversification role for their portfolio strategy. Considerations include what type of investment fits into their strategy (e.g., venture vs. hedge), which types of managers to invest in (emerging specialist or tenured generalist), and the liquidity profile of the asset class (greater liquidity with tokens but no IPOs to date given industry nascence).
Since the 2017 bull run, over $1B of dedicated crypto venture and hedge funds have been raised (Blockchain Capital $150M, A16z @$300M, Paradigm @$400M, Dragonfly $100M and more) with institutional participation. Asset allocation is an important indicator of market growth and the rate of capital formation in any new industry.
Traditional Financial Institutions Who: custodians, exchanges, brokerage providers, asset managers, and banks What: trade and execution services, custody, OTC desks Examples: Fidelity, ICE (Bakkt), JPMorgan, DRW
Traditional financial institutions are cautiously watching the space, some with disregard while others leaned into the space. It wasn’t until recently many realized cryptoassets could pose both a serious threat and opportunity for their existing businesses. Regardless of their position, it became a strategic watch area inside virtually every financial services institution. Historically, financial services has been slow to respond to digitization that is prevalent in other industries. However, fintech is already eating at their products and pricing strategies with the rise of online robo-advisors and digital banking. These institutions are all facing similar trends: an aging investor base, fee compression across all products and services, decreased brand allegiance with millennials, largely outdated infrastructure, and of course, increased customer demand for more crypto education and access. From their strategic agenda, institutions are constantly looking for opportunities to diversify revenue streams with large growth markets and higher margin products. The balance here comes into play with risk tolerance and their ability to make decisions quickly and adapt to the market with their existing infrastructure.
At Matt Walsh noted — the best institutions will cut through innovation theater and really try to understand how they can leverage the technology. On one end we have Fidelity who is diving in deep to understand the entire ecosystem (mining, trade execution, custody, etc.) and have taken steps to offer custody and eventually execution services. On the other end of the spectrum JPMorgan’s enterprise coin is more conservative, by creating a proof-of-concept internal tool, rather than a revenue generating or customer facing product. While still a net positive for understanding and awareness, I’m paying closer attention to the Fidelity’s of the world.
Fintech aligns well with crypto — both having a shared goal of using technology to reach underbanked or hard to access populations, with cheaper and accessible products. There is also a demographic overlap with younger, tech-savvy, less financially wealthy consumers. This backdrop coupled with nimbler operations and an updated tech infrastructure makes fintech players extremely well poised to capture crypto interest. Initially we are seeing brokerage products like Robinhood and POS systems like Square make the first leaps into the space — indeed, Square’s latest annual earnings report show they did $166M in revenue from bitcoin in 2019, with a net profit of $1.69M. The motivations here are less about disruption, and more focused on how they can use the technology and assets to spur new growth and address customer demand.
Payment companies Who: credit cards companies, payment processors, remittance services What: strategic investments via venture capital and partnerships Examples: VISA, PayPal
Payments or becoming a “medium of exchange” is one of the original use cases for cryptoassets. Over time, we’ve realized that the payment rails for most of the developed world actually work incredibly well, and may not benefit from introducing crypto for a few reasons. The most commonly cited is the traditional scale question, with blockchains unable to handle the scale of millions of transactions that Visa processes. However, more importantly, the additional friction of going from fiat to crypto, and then converting again at the other side of a cross-border remittance (dubbed the “last mile problem”) largely outweighs any value derived from processing payments with crypto today. The scenario where this starts to make more sense, is when people are holding the digital assets alone and able to transact with them more freely.
At this point, one major question for payment companies to consider is how a macro trend in holding and transacting with digital assets may impact their business model. In other words, how are their existing customers going to use digital assets in the future and what impact will this have on their market. A few scenarios include a world where consumers use multiple digital wallets regularly, conduct commerce in both fiat and crypto, or choose to self-custody some or all of their digital assets. Until now, payment companies have been slower to respond to the potential of crypto. But it would not be surprising if many significantly increase their engagement in efforts to identify the appropriate opportunities as these macro trends accelerate.
Social Media Who: messaging applications, social networks What: wallet infrastructure, tokens Examples: Facebook Libra, Telegram, Kakao
The overlap of social media and cryptoassets is one of the most interesting trends to watch today. There are two ways to consider this — coming from a crypto perspective and then from within social media platforms. On the crypto side, social media adoption of digital assets has the potential to massively open up distribution channels around the world. This has implications for onboarding new users, building out infrastructure, and spreading acceptance and awareness. Facebook’s Libra is not viewed as competitive to bitcoin, but rather a gateway to more users adopting bitcoin.
The second angle, is how digital asset adoption will change social media business models. Social media platforms are moving from sharing user-generated information to offering user-generated products and services. Instagram already made this leap with thousands of influencers building social media based businesses and their newest payment feature for shopping in-app. With Libra, Facebook is making a strong move into financial services to complement their massive adtech business. Similar to the way direct messaging or “DM-ing” competes with email for millennials, will social media digital wallets compete with the brokerages and banks of the world?
On the other hand, social media giants represent what crypto evangelists are trying to fight against (i.e., centralized monopolies). Centralized powers with unequal access to consumer data and privacy controls. Therefore, the way in which social media companies embrace crypto will be important. If successful, it could shift their models from centralized powers to open platforms with greater privacy protection for its users.
Software enterprises have historically fallen into the innovation theater category. From their perspective they are trying to understand how public vs. private blockchains could be useful for their business models. In many cases this has led to private blockchain proof-of-concepts and not much more. However, there is a great deal of pressure to address the space (along with other technologies like artificial intelligence and machine learning) as a way to stay competitive and relevant. One of the better examples we have seen comes from Microsoft with the announced their decentralized identity tool building on bitcoin. Hopefully the industry will see initiatives like this geared at working with the open source community and understanding applications of public protocols rather than closed private implementations.
Where do we go from here?
We have major categories of institutions entering into the space, each with their own angle and value proposition. The industry has seen well over $1B of capital allocation to dedicated crypto funds, which will spur the next wave of startups and capital formation in the space. As more institutions enter we will see increased liquidity and onramps, massive distribution channels, and utility focused products & services. Perhaps most importantly, the professionals inside of these organizations will be forced to understand the space, debate its merits and learn. This will allow blockchain and crypto to move from a buzzword and proof-of-concept phase, to becoming truly understood and incorporated into strategic product roadmaps. The space is slowly moving into the mainstream, and with projects like Libra, it’s about to see a lot more institutional participation.
Standard Custody received its license to operate as a New York state-chartered trust on May 4, and it’s already making a play to gate-crash the institutional custody space.
Just days after its licensing, the firm announced the close of a $53 million Series B round for its parent firm, PolySign.
Cowen Digital Asset Investment Company led the round with a $25 million strategic investment. The two will also partner, with PolySign providing digital asset custody solutions for Cowen clients through its newly licensed trust arm, Standard Custody. Blockchain.com and Race Capital also participated in the round.
Through Standard Custody, PolySign is looking to fill a gap in the custody space. While many crypto firms are attempting to build all-in-one services, with exchange, brokerage and custody housed under the same roof, CEO Jack McDonald says Standard Custody plans to differentiate itself by focusing solely on custody-based services for institutions.
Though Standard Custody plans to expand its range of services, McDonald says it will stop short of being an exchange unlike others in the custody space.
“We think that ultimately the institutions that are wading into the space, more and more of the traditional institutional asset managers, are going to want to see a segregation of duties there between exchange activity and custody activity,” he said.
That could mean hedge funds, family offices, endowments and exchanges could make up its client base going forward, but not retail-facing activities. Others serving the retail market have expressed interest in Standard Custody’s services, mostly due to its recent licensure. It’s the first to get approval for a de novo trust application in New York, and that’s positioning it to emerge as a favorable partner for a variety of clients, according to McDonald.
To build out custody and escrow services, Standard Custody needed to be a qualified custodian. There’s more than one way to gain the distinction, but some fit better than others. To be a qualified custodian, firms can either become a registered broker-dealer with the Financial Industry Regulatory Authority (FINRA), a futures commodities merchant regulated by the Commodities Futures Trading Commission (CFTC) or you can be a federally or state-licensed trust bank.
For firms mainly looking to custody, it makes the most sense to become a trust but it’s recently become unclear how far a trust license extends outside state borders. The Securities and Exchange Commission (SEC) is currently seeking comment on how it should view state-licensed qualified custodians in the wake of a letter from Wyoming’s regulators. On the national level, Congress is still debating how much power the Office of the Comptroller of the Currency (OCC) should have to designate digital asset firms as national trusts and therefore qualified custodians.
Still, a New York trust license from the New York Start Department of Financial Service is the gold standard of state licenses. It’s the highest barrier of the state licensure frameworks, and also has more reciprocity than other states, meaning some other states recognize the New York trust charter and don’t require an additional license. Standard Custody is the first to receive a de novo approval, meaning it’s operating a new business as opposed to converting a previous entity like Gemini and Coinbase. That’s made it more attractive to businesses looking to set up shop in the U.S. without going through onerous regulatory frameworks.
“We do have a lot of interest in our technology from some of the more retail-oriented strategics out there and specifically wanting to tap our capabilities to business in New York and more broadly in the U.S.,” said McDonald.
Chainlink price prediction: Chainlink retests $41, set to move higher?
TL;DR Breakdown LINK tests $44 resistance overnight. Support retested at the $41 level over the past hours. Next support at $40. Today’s Chainlink price prediction is bearish as the market moved lower after setting a lower high around $44. Currently, LINK/USD retests the $41 support, once it is broken, we should see further downside over […]
Support retested at the $41 level over the past hours.
Next support at $40.
Today’s Chainlink price prediction is bearish as the market moved lower after setting a lower high around $44. Currently, LINK/USD retests the $41 support, once it is broken, we should see further downside over the next 24 hours.
The overall market trades with mixed results as Bitcoin trades flat around 0 percent, while Ethereum has lost almost 3 percent. Stellar (XLM) is among the best performers with a gain of 5 percent.
LINK/USD opened at $41.5 after bearish close yesterday set a lower high at $48. Earlier today, another lower high was set around $44.5 after a retest of $41 support. Therefore, the market trades in an increasingly tighter range. Once the range is broken, we will see where the market is headed next week.
Chainlink price movement in the last 24 hours
The LINK/USD price moved in a range of $41.08 – $44.61, indicating a moderate amount of volatility. 24 trading volume has decreased by 13.92 percent and stands at $2.2 billion. Meanwhile, the total market cap stands at $17.7 billion, ranking the cryptocurrency in 13th place overall.
LINK/USD 4-hour chart – LINK
On the 4-hour chart, we can see the Chainlink price pushing to break the $41 mark once again.
Overall the market continues retracing from the all-time high set around the $53 mark on the 10th of May. The new all-time high was set due to a 70 percent upswing from the previous major support level around $31 set on the 23rd of April. Therefore, we could see similar performance over the upcoming weeks once the Chainlink price stops retracing.
Earlier this week, Chainlink made two separate waves lower, resulting in a total retracement of around 25 percent. The support around the $40-$41 mark has already been retested twice. Therefore, we could see the support break later today as bears continue pushing LINK/USD lower.
Once the support is broken, we could see LINK/USD move towards the next minor support, around $38. From there, the market could potentially start to reverse in a similar way as during the middle of April.
Alternatively, if a further downside is rejected over the next hours and the $40-$41 support holds, we could see LINK/USD move sideways over the next 24 hours as it prepares a base from which to push higher early next week.
Chainlink Price Prediction: Conclusion
Chainlink price prediction is bearish as the market continues trading in a bearish momentum over the past days. Earlier today, another lower high was set around $44.5, indicating that bears are still in control, and we are likely to see LINK move below the $41-$40 support area early next week.
Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.
Solana (SOL) has climbed into the top 15 following a new all-time high of $52.60
While the weekend saw relatively bearish price action for the majority of the market. SOL managed an impressive gain of over 20% to reach a new all time high.
The project now sees itself being catapulted into the top 15 spot in terms of market capitalization. With a total market capitalization of $13.6 billion. Not bad considering it started the year priced at a measly $1.51. The recent all-time high now means that SOL has seen a 3,100% gain in 2021 alone.
Solana had previously been dubbed one of the projects that could potentially kill ethereum,
Solana hackathon commences
The new all-time high comes off the back of the launch of Solana’s hackathon which began on May 15. The Solana Season Hackathon has attracted over 10,000 registrations to the event. The hackathon is set to run from May 15 to June 7. The event is offering up to $1 million in global prizes and seed funding for participants, including an all-star lineup of speakers.
Solana has seen rapid growth within the crypto space in 2021. Having launched late in 2020, the project is now vying for a top ten spot after moving swiftly into the top 15.
Solana is described on its website as “a fast, secure, and censorship resistant blockchain providing the open infrastructure required for global adoption”.
The project has already implemented key features to its ecosystem, including decentralized finance (DeFi) capabilities, non-fungible tokens (NFT), and a decentralized exchange (DEX).
Previous analysis from BeInCrypto suggested that SOL was one of May’s top altcoins to watch. With technical analysis indicating the project could climb to suggested targets of $60 and possibly $68 in the future.
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
Ryan is a Fintech specialist with a passion for cryptocurrencies and blockchain adoption. He discovered Bitcoin in 2016 when investing in a Ponzi scheme, and it was the best decision he ever made.