Companies race to solve bitcoin’s security problem despite slumping prices

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BitGo is not the only one plowing ahead on custody solutions. Coinbase, Gemini (run by the Winklevoss twins), Ledger and ItBit are also looking to be those trusted safeguards. Japanese bank Nomura announced plans in May to offer crypto custody. Goldman Sachs and Northern Trust are also reportedly exploring offering custodial services.

Sanford C. Bernstein is among the firms arguing that reputable custody is one of the biggest headwinds to institutional adoption of cryptocurrencies. Solving that problem could be one way to make money in the space, according to Bernstein.

“As the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms to engage in the eco-system,” Bernstein analyst Christian Bolu wrote in a note to clients in August. “These include the provision of custodial and asset management services as well as traditional brokerage functions like market-making.”

Part of the hesitation from institutional investors is headline risk. As of the end of June, $1.6 billion in cryptocurrency had been stolen from clients, according to CoinDesk’s 2018 State of Blockchain Report.

Hacks have also been an issue for bitcoin prices this year. Cryptocurrencies have lost more than 60 percent of their market capitalization since the beginning of this year, according to CoinMarketCap.com. Trading volumes of cryptocurrencies have also plummeted 65 percent while the price of bitcoin has fallen 50 percent this year.

Despite waning interest, Belshe is betting that BitGo will at least still have cryptocurrency to store long-term.

“This is early stages in an industry that’s volatile right now,” Belshe said. “We’re in a down cycle in terms of where we’re going, but the institutions see an opportunity. It’s going to progress quickly.”



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