Coinbase Prime, the institutional trading platform launched by North America’s largest cryptocurrency exchange Coinbase, has racked up a major customer for its services. According to reports, the San Francisco-based exchange has signed a hedge fund with more than $20 billion in assets as a customer. It is also said to be courting other hedge funds in its bid to increase the share of institutional customers in its portfolio.
Coinbase Prime is a suite of tools launched by the exchange for institutional customers. These tools include margin financing, OTC block trading, and execution algorithms. The company also launched a custody solution recently aimed at institutional investors. During its launch, the company said it had already signed up ten hedge fund clients and was targeting $5 billion in assets and 100 clients by the end of this year. (See also: Coinbase Tries To Reel In Institutional Investors).
The Importance Of Institutional Investors
Coinbase has not yet been approved to act as a broker-dealer for clearing trades. But the company has announced acquisitions that allow it to offer similar facilities to institutional clients and has also tied up with Electronic Transaction Service, a regulated entity, to offer trading facilities to customers. It has also unveiled a series of new products, from “white glove” services targeted at banks to automated matching engines for buyers and sellers, to attract institutional investors.
In an appearance on CNBC recently, Adam White, Vice President at Coinbase, said the company was gearing up to sign its third tranche of initial institutional customers soon. According to him, institutional customers value three attributes – transparency, compliance, and liquidity. “Those are the exact three things that Coinbase is working on,” he said, adding that the change would not happen overnight. (See also: Coinbase Buys Paradex).
Institutional investors are important to the cryptocurrency ecosystem because they could bring stability and capital to crypto markets. After a surge in trading volumes and new customers last year, cryptocurrency markets have slid for most of this year. Traders have exited their positions and volumes are low.
Institutional investors, such as hedge funds, could prop up the ecosystem with their investments. Currently the only direct way for hedge funds to invest in cryptocurrencies is through exchanges. But the frequency of hacks at cryptocurrency exchanges has multiplied as they have gained mainstream spotlight. Besides, not all exchanges offer secure custodianship of cryptocurrencies. Coinbase is among the first prominent exchanges to offer such facilities to customers.
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