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Are Big Investment Banks and Hedge Funds Trading in Bitcoin?

Bitcoin’s performance over the last decade was a sight to behold. It not only outperformed expectations but spurred the advent of new financial ecosystems such as crypto decentralized finance (DeFi).

With the recent U.S. dollar inflation and failure of traditional systems, people are looking at different investment options, namely  — cryptocurrencies. 

What does this all mean for big banks and hedge funds? Have they changed their view on Bitcoin? What does this mean for you?

Why Bitcoin Changed the Way Traditional Investments Work

It’s easy to see that big banks and regulators tried to downplay Bitcoin, claiming it was too risky or dismissing it entirely. In 2014, when Bitcoin surpassed $1,000, regulators attempted to control Bitcoin by giving the cryptocurrency semi-legal tender status.

At the World Economic Forum that same year, the chief executive of JPMorgan Chase, Jamie Dimon, called Bitcoin a “terrible store of value that is also being used for illicit purposes.” H. Rodgin Cohen, the finance industry pre-eminent lawyer, went on to add at a meeting discussing the violations of Iran’s sanctions that he “was very worried about Bitcoin and its use.”

With the passing of the years, Bitcoin became a store of value that has continuously outperformed other assets — like stocks or bonds —and shifted many investors to the side of cryptocurrencies. Not only that, but people are losing trust in the established, centralized institutions.

The Rise of Institutional Investment in Cryptocurrencies

Since Bitcoin’s birth, over a decade ago, the creation of altcoins, crypto banking or crypto wealth management institutions, decentralized finance, and other blockchain technologies has made it a viable alternative for building long-term wealth.

As a result, Institutional Investors are looking for ways to get their clients receive exposure to digital assets. In 2021 alone, $17 billion worth of institutional capital flooded into the space, according to Forbes. The attention of institutions grew as more and more warmed up to cryptocurrency these past few years. 

With these well-performing assets, crypto wealth management platforms — like Abra Institutional Trading — allow for a unique, custom portfolio that will enable institutions more exposure or less depending on their appetite for crypto.

What’s more, cryptocurrency offers more opportunities for financial inclusion in our society, but the rise of crypto wealth management platforms can shift big institutions to the side of crypto. 

What do Traditional Services Offer Today in Terms of Digital Currency?

Times are changing, and so is big finance. Bitcoin’s success and the subsequent cryptocurrency revolution are too much to ignore. It has cost banks and hedge funds time and profits, and now, they’re racing to catch up.

Here we look at what banks and hedge funds offer in terms of cryptocurrency options:

Banking:

Although banks are warming up to blockchain technology — with the example of JPMorgans’ token, the JPM Coin — they still have a long way to go to catch up with crypto platforms offering services to institutional investors and high net worth individuals.

  • As an example, Abra offers opportunities for institutional investors for trading, borrowing, and lending with over $1 billion worth of assets powered by the retail platform. It provides access to institutions looking to borrow fiat, stablecoins, or digital assets.
  • For High Net-Worth Individuals, Abra offers unique opportunities like more yield on larger balances, up to 12.5%, trading with more liquidity and very low slippage, and very flexible loan terms on digital assets for large amounts.

Hedge Funds:

Crypto hedge funds came into existence with the creation of blockchain-focused hedge funds like Pantera Capital. Traditional hedge funds are also warming to the idea. Although keeping their position low, 20% of conventional hedge funds are investing in digital assets.

  • Crypto-exclusive hedge funds: These mix multiple cryptocurrencies, not only Bitcoin and Ethereum. A riskier option, these seek to maximize gains as much as possible, capitalizing on the popularity of newly created ICOs.
  • Mixed-type hedge funds: These hedge funds work by adding well-performing cryptocurrencies, namely Bitcoin and Ethereum, to traditional asset types. Although a less risky option, the returns are lesser. 

Actively Managed Funds:

Abra recently announced the launch of Abra Capital Management that will give clients access to actively managed structured products, investment funds, and Abra’s best-in-class buying, trading, and borrowing services. Three of the funds will focus on yield-generating opportunities in the crypto market for stablecoins, Bitcoin, and Ethereum, while the remaining two funds will center on early-stage token and equity investment opportunities.

A Better Way to Trade With Abra

Although traditional financial institutions are finally catching up with modern technology, they have a long way to go. People can opt for a crypto banking institution, platform, or even DeFi to maximize their assets or trade cryptocurrency.

Here at Abra, we offer opportunities to maximize your crypto assets. From single traders to institutions looking for more exposure to the crypto world.

For institutional investors, find out how Abra Capital Management can help get exposure to cryptocurrencies. Get in touch with us and see how Abra can help you create a custom portfolio that suits your needs.

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