Institutional Investors Sending Coinbase Billions a Month

Coinbase’s founder Brian Armstrong (pictured at his new offices under construction) has stated one of the biggest crypto broker and exchange is handling $200-$400 million of new crypto assets on behalf of institutional investors, translating to circa $1-$2 billion a month.

“Whether institutions were going to adopt crypto or not was an open question about 12 months ago,” Armstrong said before adding:

“I think it’s safe to say we now know the answer. We’re seeing $200-400M a week in new crypto deposits come in from institutional customers.”

Back in May Armstrong revealed institutions had become some 60% of all trading volumes on Coinbase Pro, the exchange arm of the Silicon Valley company.

In addition to facilitating payments for businesses that want to accept cryptos, as well as the brokerage service for “retail” customers, they also launched Coinbase Custody last year.

Unlike what the name suggests, this appears to be more than just holding on behalf of customers bitcoin, eth, and many other cryptos, with Armstrong stating in May:

“We’ve started adding features like OTC trading through Coinbase Custody where these large block trades are starting to happen.”

That was in the context of a discussion about institutional investors with Armstrong further stating earlier this month:

“The institutional space for crypto is going through a period of incredible growth. Many still don’t realize it. Coinbase Custody now has close to 200 institutional customers, onboarding hundreds of millions of dollars in crypto a week.

Having a regulated, trusted, custodian in cryptocurrency has been a huge unlock for the industry.”

They’re soon to face fierce competition from Bakkt, which taunts CFTC oversight and a New York Trust Charter, giving the greenlight for bitcoin settled monthly futures as well as a one day futures version that sounds more like plain spot trading.

Coinbase however has moved to acquire Xapo’s institutional business, one of the earliest bitcoin custody company that keeps the crypto in Swiss bunkers.

The price they paid for it was just $55 million perhaps because Xapo hasn’t quite kept up with putting their name out there amidst huge changes since they started providing their service in 2014, two years after Coinbase launched in 2012.

“In just over one year since launch, Coinbase Custody has grown to over $7 billion in Assets Under Custody (AUC) stored on behalf of more than 120 clients in 14 different countries,” they say.

The insured platform has distinguished itself by never being hacked despite trailblazing a very new asset and a very new ecosystem.

Their “secret” appears to be chopping up cold wallets in addition to full compliance with any regulatory requirement and cooperation with authorities if required.

Few have managed to compete so far with the YCombinator seeded company, but traditional businesses are now entering the institutional space as bitcoin and cryptos in general continue their march towards mainstream finance.