Institutional Investors: The serious money is warming up to Bitcoin

Storing crypto has always been a hassle due to threat of vulnerability to hackers and human errors, all of which could lead to the loss of private keys. In fact, the only vulnerability in the cryptocurrency architecture is the storage element, which has been exploited many times. This has lead to billions of dollars of cryptocurrency being stolen from individuals and institutions. The fact that there is no way of resolution reversal if a breach or a hack ever happened has made it a serious issue faced by the industry. Now, there is a new wave of activity in the field of crypto storage aimed directly at corporate and large clients, who take security a bit too seriously. 

Big players

Currently there are some providers of the service required by big customers, the extra security storage. Like the Swiss company Xapo, which stores their customer private key buried deep in the mountains of the Swiss Alps; and what’s more bizarre is the fact that this service is free of cost for wealthy investors, these measures might seem paranoid but that is the way companies see crypto security. Another big player in the space is Coinspace, which has a long ritual for storing their clients crypto. It starts with the generation and printing of private key within a faraday cage, and the USB used to boot the laptop and the laptop itself is destroyed after this. The security measures go even further, the electricity for devices are derived from a shielded power supply inside the faraday cage. These keys are used to transfer funds from clients account, but they are never stored electronically, reducing the risk of hacks. Firms like Fidelity and Bakkt have recently storage solutions of their own.

Recent activities

There have been some major movements in the crypto storage space including acquisitions in the multi million dollar range. Earlier this month, Grayscale Investments moved its $2.7 billion worth of crypto funds from Xapo to Coinbase, more than doubling the company’s assets under custody. And last week, Coinbase purchased Xapo outright for $55 million Dollars, this is following a bid war with Fidelity Digital Assets. Such acquisitions only mean one thing and that is these companies expect huge growth in these segments.

The next big thing

Even though billions of dollars are handled by companies like Coinbase and Fidelity, yet only a small portion of these are funds that have chosen to use the secured storage, thus implying that there is room to grow. Also, a recent survey done by Fidelity covering 400 institutional investors on their views on crypto was mainly positive. Of the 400 institutional investors surveyed, it was revealed that 22 percent already held cryptocurrency, and another quarter saw potential to do so. This means that there is going to be a lot of demand for this kind of service in the near future

Why now

Nothing has changed much from the golden age of crypto late 2017 and early 2018, It’s still backed by nothing and managed by no government; it’s still dominated by a select set of mining pools, based mainly in China. However, things have changed although nothing major; infrastructure around the technology has grown rapidly, big companies like JP Morgan and Facebook wants to issue their own coins. There are futures contracts being issued against crypto, and finally crypto based ETFs might also be coming soon. But most importantly, with the global economy in trouble, crypto seems to be a safe bet, some see it safer than gold and bonds.

When major smartphone manufacturers were rolling out crypto wallets within their phones, there was a large scale concern that projects and startups focusing on crypto storage will go bankrupt. Even though many of these solutions will be made useless by the introduction of smartphone crypto wallets, the new developments happening as seen in these projects will stay for a longer period.The new demand for security from corporate and institutional clients will boost this niche industry, and this in turn can benefit the whole industry as these solutions will slowly trick down into the consumer space as well
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