The bitcoin market is 90 percent retail-based. And that makes Fidelity Investments nervous about its very-own digital currency offerings, says the company’s Personal Investing President, Kathleen Murphy.
The business executive said in an interview with CNBC Squawk Box that bitcoin is a far riskier asset for retail investors that it is for institutional investors. She admitted that while Fidelity’s chief executive officer, Abigail Johnson, is a huge fan of cryptocurrency, the company is still cautious about how it wants to offer its bitcoin custodian and trading services to investors.
Murphy confirmed that Fidelity is embracing cryptocurrencies because they want to understand it further. And while doing so, they want to be innovative and thoughtful about the digital currency space.
Nevertheless, the firm does not want to offer trading services on a retail level, Murphy said, adding that they “want to be very careful about making sure that investors that REALLY are not institutional investors don’t make a mistake with cryptocurrencies.”
We are very careful about where we offer crypto, says Fidelity Personal Investing President Kathleen Murphy. "We want to be very careful that investors don't –who really aren't institutional investors don't make a mistake with cryptocurrency." #bitcoin pic.twitter.com/VSXGmUPcB3
— Squawk Box (@SquawkCNBC) October 11, 2019
Big Firms Need Big Clients
Murphy’s statements came two days after the US Securities and Exchange Commission (SEC) rejected the Bitcoin ETF application filed by Bitwise Asset Management and NYSE Arca. In one of its first descriptive orders, SEC provided a comprehensive view on why it does not want to approve a bitcoin-based derivative. The securities regulator complained about how a majority of bitcoin market volume is outside the US without any regulatory oversight, which makes it susceptible to price manipulation. It also raised concerns about bitcoin’s use in illicit activities.
Fidelity’s bitcoin products, nevertheless, are not ETFs. The Boston firm announced in May that it would offer straightforward cryptocurrency trading services to institutional investors only. In those regards, Fidelity also launched a cold storage custodianship service, a regulated digital vault that would store cryptocurrencies to back on- and off-ramp trading on its platform.
“We currently have a select set of clients we’re supporting on our platform,” Fidelity spokeswoman Arlene Roberts told Bloomberg in May. “We will continue to roll out our services over the coming weeks and months based on our clients’ needs, jurisdictions, and other factors. Currently, our service offering is focused on Bitcoin.”
No Institutional Investors for Bitcoin?
Institutional interest, particularly in bitcoin, has dwindled since May. Open interest in CME’s bitcoin futures contracts, which cryptocurrency market treats as a gauge to measure the presence of big investors, dropped severely since June. Atop that, bitcoin underperformed as a safe-haven asset against a string of poor macroeconomic catalysts, showing that investors are not looking at the cryptocurrency in times of crisis.
ICYMI: Thursday's Bakkt Bitcoin Monthly Futures:
? Traded contracts: 109 (-51%)
? Day before: 224
? All time high: 224
— Bakkt Volume Bot (@BakktBot) October 11, 2019
Recently, the launch of the first physically-settled bitcoin futures by Bakkt also further with a cold response. The ICE-backed platform processed only 149 monthly contracts on its first day, revealing that institutional investors are focusing more on the outcome of the ongoing US-China trade talks, Brexit, and other global factors.