Brian Kelly, a prominent cryptocurrency trader, contributor to Fast Money, and founder of BKCM, stated on the May 9 Fast Money show that the adoption of bitcoin by Wall Street’s biggest financial institutions such as the New York Stock Exchange (NYSE) and Goldman Sachs will lead the cryptocurrency market to surge in the short- to mid-term.
Kelly is Shocked
Earlier this week, as we reported, NYSE’s parent company ICE Exchange has been developing and testing a bitcoin exchange to serve investors from the traditional finance sector. Various reports revealed that ICE Exchange is not launching a futures market like CME and CBOE, rather a proper bitcoin exchange on which investors can buy, sell, and store bitcoin directly.
“The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin, according to emails and documents viewed by The New York Times and four people briefed on the effort who asked to remain anonymous because the plans were still confidential,” the New York Times reported.
Kelly emphasized that while he is “shocked” the cryptocurrency market did not surge in value based on the entrance of NYSE into the market, he stated that investors have missed out on an important element, which is that like Xapo and Coinbase, NYSE and its parent company ICE Exchange will start to operate a custody solution for institutional holders.
“I’m actually a bit shocked that the market did not pick up on this. Dominic Chu said that investors will get physical delivery of bitcoin. That doesn’t sound that interesting except for the fact that it means ICE Exchange has a custody solution. That has been the big hurdle. How do you hold onto these assets. These are generally bearer instruments, just like gold bearer bonds. That’s the big deal. They have come up with a custody solution for institutional holders,” said Kelly.
He further noted that the development of a bitcoin custody solution by ICE Exchange signifies cryptocurrencies have become an emerging asset class. More importantly, Kelly added that the growth of cryptocurrencies as an emerging asset class will allow multi-billion dollar pensions, endowment, and institutional investors to invest in the cryptocurrency market.
“Finally, it opens the door for pensions and endowments. Up to this point, it has been very difficult for them to get comfortable compliance wise in holding cryptocurrency. If ICE has a custodian solution that is SEC compliant, that’s going to open the floodgates,” Kelly added.
What Will Floodgates Look Like?
The cryptocurrency market has become a $0.5 trillion market with barely any capital from institutional investors, endowments, and pensions. If institutional investors begin to enter the cryptocurrency market with tens of billions of dollars in new capital, it will allow the cryptocurrency market to grow at a pace that is incomparable to its growth rate in the past. It could enable the cryptocurrency market to evolve into a multi-trillion dollar market, as many investors have expected since 2016.