Cryptocurrencies Market Trends in Banking & Wealth Management

Especially since 2017, there have been complex discussions in the attempt to predict what cryptocurrencies market holds in the near and long future. The more data we collect on the users’ spectrum, the more likely we are to depict the noteworthy changes this industry will experience. Their diversity is already increased, despite numerous legal and economic obstacles in the way. Cryptocurrencies’ focus has clearly shifted from solely being digital assets to the possibility of being integrated in the traditional financial systems and not only.

Bitcoin certainly consists of the pioneering factor of such trend, and a lot have happened to the industry since it was firstly launched. We are talking about:

• - prices being on roller coasters
• - exchanges being hacked
• - banning laws
• - ads exclusion from social medias
• - acceptance and adaptation growth

And that’s just the tip of the iceberg.

Adoption of crypto currencies

There are different approaches as far as skepticism on this new emerging trend goes. Noticeably, according to insights by Fortune Business, North America region is the earliest adoption of crypto currencies:
27% of participants in the industry, 18% transaction and 39% of wallets created.

Japan, having issued laws to register financial services agency for the legalization of crypto currencies, users mark it as a leader in the Asian market.
Similarly, APAC countries are home to 36% of participants in the industry27% of exchanges, 19% wallets. This is followed by Germany that has treated Bitcoin as a private money without any taxes unless held for a year or more. This surely leads to an increase in the number of currency owners

The year 2019 seems to have been the manifestation where entrepreneurs, developers, investors and users have enthusiastically been taking an interest in cryptocurrency propositions for improved solutions. How will this look like by the end of 2020?

This article focuses on the consumer banking sector and its services together with wealth management institutions that are building paths towards cryptocurrency applications.

Cryptocurrencies Market – Consumer Banking

Consumer-Oriented Approach

Convenience is among the core “millennial” priorities leading to considerate adoption of digital wallets. They are all about easy and fast transactions in a cashless world (i.e wristbands for payments in festivals). As such, Maicoin in Taiwan has brought Bitcoin to thousands of convenience stores. It has also integrated with Facebook Shopping Cart, massively facilitating the purchasing processes. Companies will be increasingly reaching out not only to professional traders, but to consumers as well (retails, hotels, bars).

Digital Payment Act

Under this act, crypto companies in Singapore must first register and then apply for a license to operate in the jurisdiction. As of Jan. 28, 2020, the payments act gave existing crypto companies a month to register with the Monetary Authority of Singapore. After companies’ registration, in a six-month period they must apply for their payment institution license. Binance has registered while Liquid Pay and Luno will probably follow with MAS Source. There have been similar regulating policies in Taiwan and Japan.

Crypto Lending Service

According to this study by Orca Alliance, the number of existing cryptocurrency wallets can go up to 500 million by 2024. As with the fiat money, there is an issue deriving from crypto wallets: liquidity. And in order to leverage their asset, crypto users naturally see the service of lending worthy for a passive income source. Binance, for instance has launched this service with yield rates from 4 up to 15% for crypto-enthusiast willing to lend. Similarly Celsius Network, BlockFi and Nexo’s offer the same service with yield rates up to 10%, 8.5% and 8% respectively. This digitization through loan platforms shows another signal how the financial sector is adopting to the cryptocurrency market and vice versa.

Regulations

SEC has redefined Accredited Investors and it is considered a move that will increase access to regulated cryptocurrency investments. In the same notion, MAS has redefined Accredited Investors for effect April 2019 and with the move towards crypto market regulation, we might expect the same interest to take flight in the affluent or even private banking sector (existing Wealth Management players: Citigold, HSBC Jade, OCBC PPC, DBS Treasures)

Cryptocurrencies Market – Crypto Asset Management

Context

Morgan Stanley stated Bitcoins and altcoins have constituted a new institutional investment class since 2017. And indeed, the market capitalization of cryptocurrencies has gone from $17 billion in 2017, peaked to $800 billion in January 7, 2018 and it is at about $300 billion now in 2020 according to CoinMarketCap.

Retail investors are increasingly looking to diversify their portfolios. Hence, the market seeks to provide with more and more solutions to help. Due to the industry’s complex nature, buying and selling crypto is still not as easy as managing regular equities. There is still a range of skills needed to feel comfortable, which often becomes a barrier in becoming a participant.

• - A wallet that supports the cryptocurrencies
• - An exchange that provides the respective listings
• - Verification process
• - Diversification becomes difficult throughout wallets and exchanges

Asset Management Platforms

There are different models to the solution when it comes to performance, technology and security in crypto asset management.

• - Several funds that offer crypto asset management and investment on behalf of customers. So far, this model has shown strong results. Bitwise Asset Management is reporting a 51% return in less than 4 months after conceiving a crypto-specific fund.
• - Traditional centralized model (Iconomi) that stores the deposited digital assets and controls the private keys. External’ DAA’ managers (Digital Asset Arrray Manager) may be used to provide the features. 
• - Decentralized platform (Chainlink) that runs on different smart contracts of Ethereum blockchain and oracles, which are third party services with a centralized point of control. The latter access external data that are essential in triggering smart contracts. 
• - Peer-to-peer network (Equbit) which is based on a new blockchain and provides little barrier for entering.

As the attempts grow on making the crypto asset management as mainstream as the rest, users expect this burgeoning asset class to have an improved increase. In addition, cryptocurrencies remain uncorrelated with any other major asset class making it an attractive asset for this use case.

Finally, cryptocurrency trends do indicate the market is moving towards a bull cycle, meaning the demand from both retail and institutional players will fuel the progressive growth in the industry. Well, we say kudos to the cryptocurrency and bitcoin industry for beating some of the odds, and continuing to expand their applications in the market.