Trading volumes for bitcoin and ethereum have increased by 106% in a traditional foreign exchange (FX) platform that claims $2.3 trillion in total trading volumes during the first half of 2020.
The London based LMAX exchange, regulated by the Financial Conduct Authority (FCA), says the first half of 2020 saw spot crypto currency volumes of $36 billion.
Under LMAX Digital, they began offering banks and investment managers as well as non-bank big institutions the ability to spot trade Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin in May 2018.
They say the exchange is seeing record numbers of new clients for LMAX Digital, claiming it now works with more than 200 large global institutions trading crypto currencies in the US, Europe and Asia.
“We continue to look for ways to revolutionise capital markets, with some notable successes,” David Mercer, CEO of LMAX Group, said in a statement this Friday, adding:
“In the two years since LMAX Digital launched, it has become the leading crypto currency exchange for institutional market participants and has secured its position as the primary price discovery venue.
LMAX Weekend FX service, which launched in June 2020, enables market participants to capitalise on FX movements over the course of a weekend, and is already showing early encouraging signs.”
They do not provide a breakdown of how much each crypto handled in trading volumes, but bitcoin specifically has been confirmed by numerous studies as being an uncorrelated asset that can be used to hedge other assets.
In our own reporting there appears to often be an inverse correlation between the CNY and bitcoin for example, as well as to a lesser extent with the dollar, in that if either weakens, then bitcoin tends to strengthen.
For ethereum, studies have found it and other cryptos appear to be highly correlated to bitcoin, although from our own reporting that does depend on time periods.
Still it is probable that ethereum can perform the same function as bitcoin in regards to hedging and in regards to it being a diversifier in trading or investment portfolios.
These qualities have increased significantly the interest of institutional investors in the new asset class, most probably because their clients are demanding it.
Pension funds in particular, as well as university endowment funds and the like, began dabbling in bitcoin and eth diversification in mid to late 2018 once it became clear there are investment benefits as far as portfolio theories go.
Since then this interest has only increased, but it is only this year that platforms like LMAX, which are already established and already have their own institutional base, have began being less shy about their crypto services.
Just last month, TradingScreen, which also focuses on serving banks and that sort of institutional level, announced they’re integrating bitcoin, eth and other cryptos.
Then what is in our view the most under-the-radar news of 2020, a Bitcoin ETF was listed on Toronto’s stock exchange after being given the regulatory green light.
Behind the scenes, as in very openly but in ‘technical’ corners where few pay attention, there appears to be some fumbling especially by Americans regarding this decision by Canada’s regulator.
Yet the trend appears unstoppable. ETN after ETN keeps being listed in Europe, quietly financial advisors are telling people to invest at least 1%-2% in cryptos, and academic papers studying every bit of investment quality, primarily for bitcoin but now and then also for eth, keep coming.
What stands out about these academic papers is their general positive tone. Just recently, the authors of one study on bitcoin’s relationship to geopolitical risk, said:
“We can expect that cryptocurrency will penetrate into most aspects of human society, and its market will become a significant leading indicator of the macroeconomic and political situations of any nation.”
Of course if it is just one paper or two papers, the authors may well have some bias, but there isn’t one paper we have come across that dismisses bitcoin where investment qualities are concerned in the comparative setting with other assets.
That contrasts significantly with the tone public consumption newspapers take which often hardly hide their bias against cryptos.
But of course academics deal with data and the data is what it is and therefore the data has to form their view at least in the presentation of the paper.
All of it suggesting cryptos are entering the big stage of welcoming institutional investors that play with hundreds of billions or even trillions, including potentially central banks which sooner or later may well have to diversify at least some of their slush fund investments.
For now, it’s still just the pre-beginning really, as this attention from institutional investors is very new and of course they do move somewhat slowly, but they’re coming.
“What we’re seeing more and more now in the UAE and globally, is the increasing acknowledgement that cryptocurrencies are the present and future of money.” deVere.