Fidelity: Bitcoin trading for retail clients
Financial giant Fidelity may launch Bitcoin trading for retail customers in November.
💥BREAKING: Fidelity is launched #Bitcoin trade for personal customers in November! 😱
Fidelity has $4.3T in assets under management.
— Bitcoin Archive 🗄🚀🌔 (@BTC_Archive) 8 September 2022
Fidelity: New trading service for clients?
Although there is no official confirmation yet, a recent press release posted on the company’s website, explicitly suggests something similar.
Yesterday, the launch of the Fidelity Hedged Equity Fund (FEQHX) was announced, which is a fund dedicated to alternative investment products specifically for private investors.
These Fidelity alternative mutual funds, as stated in the official press release, may include alternative investments such as “Bad Debt, Real Estate Debt, Private Equity and Bitcoin.”
Fidelity, whose full name is actually Fidelity Investments, is an American financial giant, so much so that it is by far one of the largest asset managers in the world, with more than $4.5 trillion in assets under management and $24 billion in revenue. Among other things, it is known for managing large pension funds.
However, it is not only involved in asset management, but also offers various other investment services to institutional and retail clients.
Funds such as FEQHX in particular are precisely those aimed at private customers. Among them, the company has a particular focus on those who own large assets and invest with the aim of increasing their income when they retire.
There is even one the entire section on their official website dedicated to cryptocurrency investments.
The company has an entire department dedicated to cryptocurrency, Fidelity Digital Assets (FDA), although this one specifically deals with crypto services. Funds such as FEQHX, on the other hand, are managed and offered directly by the parent company.
Through funds like this, Fidelity can offer its private clients the opportunity to take a position on, for example, the price of Bitcoin, and thus in some way trade on the price of BTC, without having to buy and hold them directly. .
In fact, even the services offered by Fidelity Digital Assets do not involve offering cryptocurrencies directly, but ETFs that have cryptocurrencies or crypto companies as underlyings.
What is on the horizon is therefore not the launch of a classic crypto spot exchange that allows Fidelity’s customers to buy and sell cryptocurrencies directly, while also having the ability to deposit or withdraw money to non-custodial wallets, but only the ability to invest. in financial products managed by them that allow them to gain indirect exposure to the prices of certain cryptocurrencies.
However, it is worth noting that there are many clients of companies like Fidelity who have no particular interest or willingness to take on the responsibility of owning, and thus having to have custody of, cryptocurrencies.
Cryptocurrencies skepticism for old-school traders
Cryptocurrencies are based on a technology that did not exist until a few decades ago, and which, in the eyes of those belonging to the previous financial generation, is particularly difficult to understand. For this very reason, the typical Fidelity customer may not be interested at all in having to take on the responsibility of holding tokens in their own custody based on a technology they do not know well or thoroughly understand, with obvious security risks and perhaps significant investment . means to protect.
In such cases, it is quite easy to understand why such clients prefer to leave all the details and technical responsibilities to experienced financial market participants, especially given the fact that Fidelity itself has its own entire internal department dedicated specifically to these technologies.
It is therefore not surprising that the company does not seem willing to offer its customers direct access to the crypto spot market, i.e. where the various tokens can be bought, sold, deposited and withdrawn directly, but instead prefers to take responsibility. of all the technical issues, offering customers only derivative financial products that allow them to invest in and speculate on cryptocurrency price movements.
Moreover, Fidelity Digital Assets has been operating this way in the crypto markets for many years now, which gives them a certain reputation, especially in terms of security.
However, all this should not suggest that Fidelity itself does not have a direct presence in the crypto markets.
On the contrary, in order to provide security for their crypto funds, the company must own and hold cryptocurrencies, so while the customers do not operate in the crypto markets, but in the crypto derivatives market, the company operates in the crypto markets.
However, it is possible that they use intermediaries to do so, both in terms of buying and selling, which are likely to be done OTC in large volumes, and in terms of physical custody of tokens.
Fidelity therefore does not compete with the classic crypto exchanges that allow direct trading of Bitcoin and cryptocurrencies to private customers, nor with the OTC operators that act as intermediaries for large customers who want to trade large volumes of cryptocurrencies on the spot markets. It will likely simply offer its clients financial products created and managed by them to allow those who wish to allocate part of their assets to funds exposed to changes in cryptocurrency prices.
However, it is not known whether the company itself has decided to invest part of its assets, or part of its managed assets, in Bitcoin on its own.
High and low risk investments
Cryptocurrencies are financial assets with high volatility, which means that they are not particularly suitable for managing funds such as pension funds. In fact, this type of fund prefers, and should prefer, low-risk investments.
However, low-risk investments provide low real returns, which are further reduced in times of high inflation. For this reason, mutual fund managers often allocate a small portion to higher-risk investments, hoping to compensate for the reduced returns of low-risk assets in this way.
This strategy is based on the logic that if risky assets perform poorly, the losses will be small, but if they perform well, the gains can be so significant that they have a significant impact on the average percentage return.
Bitcoin and cryptocurrencies can therefore fit into such an investment strategy, although fund managers at a regulatory level may have problems with direct exposure to unregulated financial products such as these. Crypto ETFs also serve this purpose, allowing mutual funds that want to open a small position in unregulated risky assets to not have direct exposure, at the risk of breaking the law, but still be able to do so indirectly by using regulated derivative products that replicate their price movements .
In such a scenario, the assumption that Fidelity invested in Bitcoin anyway, or included cryptocurrencies in the management plans of their managed funds, at least seems plausible and not at all far-fetched. This is not sufficient to say with certainty that they have already done so, but it allows one to imagine that it is certainly possible, if not likely.
Finally, it is worth adding that Fidelity is not the only financial giant in the world to adopt such a crypto strategy. However, it is one of the most talked about because it is well known, especially in the US, and above all because it manages large pension funds involving millions of workers and former workers.
