Financial Firms Moving To Trade Cryptocurrency

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Cryptocurrencies are starting to cause a stir among traditional financial firms, according to a new study.

One in five financial firms are readying to trade in digital currencies within 12 months, says the poll by Reuters.

Researchers spoke to 400 financial businesses, and 70% said they were ready to go into the market within six months, while 22% will wait up to a year.

The trigger was the meteoric rise in the value of Bitcoin and other cryptocurrencies towards the end of last year.

Their interest was finally grabbed by the launch of Bitcoin futures in the United States, even though trading is low and digital currencies are a niche project.

Niche segment

Neill Penney, co-head of trading at Thomson Reuters, said: “Cryptocurrency is still a relatively small part of the trading market, but this survey makes clear this niche segment is starting to enter the mainstream of the financial services industry. This is a major change from a year ago.”

Cryptocurrencies are on the rise again after the market stalled for the first three months of the year.

Experts believe a bull run is about to start on digital currencies.

Bill Barhydt, the CEO of American Express-backed cryptocurrency start-up Abra, said: “I talk to hedge funds, high net worth individuals, even commodity speculators. They look at the volatility in the crypto markets and they see it as a huge opportunity. Once that happens, all hell will break loose.”

While FTSE Global Markets reports that although cryptocurrency trading is in its infancy, circumstances are starting to change in favour of a break-out.

Investment mandates

“Many market watchers are torn between an attraction to market innovation and concerns about the robustness of many of the exploding numbers of players in the space,” said a spokesman.

“Additionally, there are also compliance issues to face, with many hedge funds and traditional funds forced to watch the rise in cryptocurrency prices with their hands tied by investment mandates and security issues.  The world is changing, and major cryptocurrency players are working to develop credentials acceptable to regulators and the wider market.”

Separate research suggests the number of hedge funds trading digital currencies has reached a new peak of 226 in the four months ending February 15, 2018. Only 37 were trading at the start of 2017.

Despite a growing number of funds, assets under management total no more than $5 billion, says consultancy Autonomous NEXT.

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