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Tesla’s Bitcoin Investment is Revolutionary for Crypto but Other Firms May Not Do The Same Just Yet – JPMorgan

Tesla, the latest institutional giant to make a Bitcoin purchase, has rekindled a positive sentiment within the crypto market and sent BTC to a new all-time high of over $40K with its $1.5 billion endorsement.

With billionaire Elon Musk’s Tesla joining other institutions such as MicroStrategy and Square in adding Bitcoin to its treasury reserve, speculations have been spurred within the crypto sector as to who may possibly be the next firm to make a hefty BTC purchase. A report released by RBC analyst has even gone so far as to suggest that Apple should be the next one to join the wave of institutional investors backing Bitcoin. The report indicated that Apple could potentially generate as much as $40 billion in annual revenue with a Bitcoin endorsement.

JPMorgan strategists have also weighed in on institutional firms backing Bitcoin. They said that while Tesla endorsing Bitcoin was great for the industry, investors should not expect an institutional trend to start that easily. JPMorgan explained that this was due to the volatile nature of Bitcoin. The JPMorgan strategists, led by Nikolaos Panigirtzoglou said:

“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin.”

Strategists explained that typically, corporate treasury portfolios, which were usually made up of diversified assets such as money market funds and short-dated bonds, were compiled in a way where the accepted annualized volatility fluctuated around 1% of the total balance sheet.

However, even a 1% Bitcoin allocation to a company’s treasury reserve would send a company’s volatility from a standardized 1% to a spike of 8%, and not everyone can afford that, the experts explained.

Nevertheless, JPMorgan strategists also recognized and applauded Tesla’s Bitcoin investment, as it served to push Bitcoin to a new all-time high of over $40K. They wrote, “Irrespective of how many corporates eventually follow Tesla’s example, there is no doubt that this week’s announcement changed abruptly the near-term trajectory for Bitcoin by bolstering inflows and by helping Bitcoin to break out above $40K.”

Visa Establishes Advisory Services, Helping Clients Maneuver their Crypto Journey

As part of efforts to expand the knowledge base of its clients and partners in their cryptocurrency journey, payment giant Visa has introduced a global crypto advisory practice as part of the consulting & analytics department.

In a statement, Visa said that the percentage of crypto awareness among financial decision-makers has skyrocketed to 94% globally, necessitating a paradigm shift when helping clients build a strategy and product roadmap in this sector.

Visa noted that the first step to getting involved in the crypto space is comprehending what this industry offers.

“For financial institutions eager to attract or retain customers with a crypto offering, retailers looking to delve into NFTs, or central banks exploring digital currencies, understanding the crypto ecosystem is a vital first step.”

At least 60 crypto platforms have been established connections with Visa, enabling the creation of a global network of product experts and consultants, as the demand for advisory services is getting higher. Their mandate entails helping financial institutions harness cryptocurrency opportunities and pilot new user innovations and experiences like CBDC-integrated consumer wallets and crypto reward programs.

Claudio Di Nella, the head of Visa consulting & analytics, Europe, welcomed this move and said:

“We’ve seen a material shift in our clients’ mindset in the last year, from a desire to explore and experiment with crypto, to actually building a strategy and product roadmap.”

Cryptocurrencies reflect a technological shift of money movement and digital ownership; every financial institution is urgently to develop their own crypto strategy in response to the new trend, according to Antony Cahill, deputy CEO, Visa, Europe.

Visa has been making significant steps in the crypto space. For instance, the payment service provider recently announced its plans to deploy a universal payment channel (UPC) that would enable different digital currencies such as CBDCs and private stablecoins to be interoperable with each other to make payments.

Moreover, in September, Visa started integrating cryptocurrency services into Brazil’s traditional banking systems.

Image source: Shuttstock

Hong Kong Crypto Exchange OSL Opens Institutions Investment in Security Tokens

OSL Digital Securities Limited (OSL), a major cryptocurrency exchange based in China, announced on Tuesday that it has become the first Type 1 SFC-licensed digital asset broker to offer sales of security tokens to professional investors in Hong Kong through private security token offerings (STOs).

According to the official statement, OSL is the first regulated digital assets brokerage firm in Hong Kong to facilitate sales of new asset-backed digital tokens classed as securities to global institutions.

OSL has been doing that for a while. So far, its institutional clients include the likes of Animoca Brands, Head & Shoulders Financial Group, China Fortune Financial Group Limited, Volmart, and Monmonkey Group Asset Management Limited.

OSL hopes to see continued growth if this is what the market demands. The firm disclosed that it offers end-to-end services for the STO transaction, acting as the bookrunner, placing agent, fiscal and paying agent, transfer agent, registrar, calculation agent, tokenisation technology partner and trading venue.

According to OSL, each digital token represents a USD10,000 unit of a Bitcoin-linked coupon-rate USD bond. The company develops the tokens using the Ethereum blockchain, has a three-month tenor and carries a fixed and a bonus coupon linked to Bitcoin performance.

In this way, investors are not only able to indirectly own digital assets pegged to traditional financial assets, but also buy the digital assets with U.S. dollars, Bitcoin and Ether, the digital token of the Ethereum blockchain.

OSL CEO Wayne Trench talked about the development: “The OSL STO transaction is a viable model for security token issuance and distribution of digital tokens by regulated operators. We designed the issuance to demonstrate the immense value and ease of distribution for a security token issued on a public blockchain. Through the STO, OSL reaffirms its position as a pioneer in the Hong Kong digital asset market. Blockchain-based digital securities represent the future of capital markets and financial products, and this is a key step in the adoption of this innovative and efficient technology.”

Through STOs (private security token offerings), OSL is playing a key central role in STO issuances and other digital asset transactions in the future. Licensed partner brokers and banks can emulate its innovative action to offer such products.

OSL Digital Securities holds a license for Type 7 (automated trading service) and Type 1 (dealing in securities) regulated activities related to digital assets from the Hong Kong Securities and Futures Commission (SFC). As a licensed broker, OSL is authorised to issue and distribute digital securities through security token offerings to professional investors.

Tokenisation Providing Opportunity for Investments

There have been increasing talks of security tokens in the cryptocurrency industry. These are digital tokens that represent tradeable securities and are regulated under securities laws. They are pegged to financial assets such as real estate, bonds, and stocks, to avoid the volatility witnessed in cryptocurrencies.

Startups with less financial experience and regulatory know-how definitely find difficulty introducing such digital assets and also hit roadblocks with regulators.

On 28th January this year, the Hong Kong Monetary Authority (HKMA) and the SFC issued a joint circular, which for the first time, allowed registered institutions and licensed firms to offer digital asset investment services through a partnership with SFC-licensed virtual asset trading platforms.

Coinbase Introduces Ethereum Staking for US Institutional Clients

Coinbase Prime – an integrated solution that offers secure custody, an advanced trading platform and prime services– has introduced an Ethereum staking service targeting corporate clients in the US.

Coinbase exchange described the addition of Ethereum to its staking options for US institutional investors as an important feature designed for financial institutions which want to enter the crypto money industry but hesitate about it.

The exchange said the staking service gives companies an opportunity to earn passive income by avoiding risks. The product offers yet another cryptocurrency on-ramp for institutions which have become interested in the industry’s explosive growth but have not always known how to get in.

Generating yield through staking plays an important role to big firms that often are looking for attractive places to invest their money.

Coinbase Prime also offers staking services for Solana, Polkadot, Cosmos, Tezos, and Celo tokens, the exchange said in a blog post on Monday.

Aaron Schnarch, the Vice President of Product, Custody at Coinbase, talked about the development and said institutional customers can create a wallet, decide how much to stake and start staking ETH in their Coinbase Prime account.

According to the exchange, withdrawal keys are held in Coinbase’s cold storage custody vault, and the staking process happens through the validation of new cryptocurrency transactions on a proof-of-stake blockchain.

Coinbase has launched its staking services to take advantage of “the Merge,” the highly anticipated upgrade of the Ethereum network.

Staking Rewards

Staking allows customers to earn a yield on their cryptocurrencies by putting them in a pool of assets, which helps support the liquidity and operations of a blockchain ecosystem. Staking is often compared to a high-yield savings account where investors can earn more than 20% in annual yield on some platforms.

However, that practice does not come without risks. Staking normally requires customers to store their money with a third-party called a “custodian,” who technically owns the funds while they are being staked. Few months ago, investors experienced huge losses of funds when custodians such as Celsius Networks, Voyager Digital, among others, went bankrupt after crypto markets crashed.

In January this year, institutional crypto custody firm Anchorage Digital introduced Ether staking for institutions.

The San Francisco-based federally chartered crypto bank started providing ETH holders with the opportunity to earn rewards for their holdings.

Anchorage also planned to expand its Ethereum blockchain service once the network moves to a proof-of-stake (PoS) mechanism later this year.

“The Merge” – the upgrade that will shift the blockchain from a proof-of-work (PoW) consensus mechanism to Proof-of-Stake (PoS) alternative consensus mechanism – is expected to begin next month. The transition to PoS, which is intended to be faster and more energy efficient than PoW, is now anticipated to occur on September 19th.

Bitcoin Price Holds Firm Around $19,000 Amid Institutional Adoption Surge

Cryptocurrency prices on Wednesday are mixed, with Bitcoin (BTC) and Ethereum (ETH) showing a slight increase, while some other altcoins like Solana, Ripple and Cardano trading downwards on Wednesday morning, 8:27 a.m., EAT (East Africa Time).

At the time of writing, Bitcoin price rose 0.06% to $19,076.23 while its lowest intraday trading price was $18,925.60 in the last 24 hours, according to data from CoinMarketcap.com. Meanwhile, the crypto market cap rose about 0.05% to $919.26 billion, and its trading volume was down by 11.45% to $48.6 billion.

Source: TradingView

On Wednesday, Bitcoin maintained the $19,000 level, where it has remained for about a month with certain momentary breaks. Generally, crypto prices remain depressed, with the flagship digital currency off its all-time high from nearly a year ago by more than 70%. If the crypto fails to hold at $19,000, market analysts have been looking for the currency to break lower – to retest its June lows of about $17,000 or find a new bottom, potentially as low as $10,000.

Richard Usher, head of OTC trading at the BCB Group, commented: “Crypto markets continue their slumber with little progress either way. Until broad risk bounces, this sector won’t.”

Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, also commented: “The price of bitcoin is maintaining the $19,000 level, but with the FOMC’s minutes and CPI ahead this week, the market will likely refrain from taking risks, which in turn will likely put pressure on bitcoin.”

On his YouTube content released recently, well-known Bitcoin bull Anthony Pompliano also commented about the price trend, saying multiple sources claim Wall Street investors and major financial institutions are planning to invest heavily in crypto. “Regardless of what happens to price in the short term, one thing is for certain. The big financial institutions, they’re here. They’re building teams internally, and they are going all-in on Bitcoin and crypto. That might not actually help the price in the short term. But that tells me over a long period of time, this industry is not going anywhere,” Pompliano told his 436,000 Youtube subscribers.

Even after three recent big announcements (US Jobs Report, Federal Open Market Committee (FOMC) minutes and Consumer Price Index (CPI) report), BTC held its price steady, which is signalling that institutional acceptance of crypto continues to build despite the bear market.

Google tapped Coinbase’s service for storing and trading cryptocurrencies, and BNY Mellon bank added cryptocurrencies to the various assets it holds as a custody manager. Last month, Franklin Templeton, Betterment, Société Générale, and other asset managers also plunged into the crypto space.

A year ago, big announcements like these could have moved the crypto market to higher levels, but now prices are largely macro-driven. The BTC price has been trading in the $18,500–$24,500 range for the last 120 days, and still, prices will likely be stuck at this level for some time. With its rate-hiking plan to tame inflation, the Federal Reserve pushed crypto prices to current lower levels – investors believe it is the institution to pull it back out.