'The client profile is changing:' Fidelity Digital Assets exec says new players are entering the crypto fold

The cryptocurrency market is growing up and that means new players are entering the fold, according to an executive at Fidelity Digital Assets. 

Christine Sandler, head of sales and marketing at the Fidelity-backed venture, opined on the changes she's witnessing in the digital asset market at the Security Traders Association's annual market structure conference in Washington D.C. last week. Fidelity offers custody and execution services to both crypto-native firms and investors as well as new entrants to the market. During a panel covering digital assets, Sandler said "the client profile is changing."

"The early adopters are a core part of the ecosystem but what we're seeing now is a huge growth in global macro," Sandler said. "What we are also seeing is longer duration players."

Commentators have noted that more hedge funds are entering the market, looking for an uncorrelated hedge against an angsty macro backdrop (think, Trump-China trade war, declining global interest rates, fears of a looming recession.) Those allocators, according to Sandler, are considering putting 1-2% of their funds to work in digital assets. To be sure, the jury is still out on whether bitcoin checks all the boxes as a safe haven asset. Its volatility could be considered one impediment to safe haven status, as noted by my colleague Ryan Todd. Still, as new financial instruments come online, such as options by CME, bitcoin's volatility could dampen. A source in the crypto brokerage industry described the "macro hedge" argument as a talking point, saying most dive into the market because they have a sense that "digital assets are inevitable and therefore having some exposure, if small, is wise."

Fidelity's new unique position

Regardless, as new players enter the space, Fidelity is looking to up the ante on its product offering around digital assets as the client profile continues to include more and more traditional players. Such entities require more sophisticated solutions — such as streaming live quotes for clients and offering a Fidelity version of a best bid, best offer. The firm is also looking to add transparency to the market, especially the opaque over-the-counter trading space, according to Sandler. Tagomi, an agency broker backed by Peter Theil's Founders Fund, offers a brokerage platform that already streams live quotes. A number of over-the-counter trading desks do as well. Sandler says Fidelity isn't a broker. 

Creating that trustworthy on-ramp is integral to getting new clients into the market. In many respects, plenty of firms are interested in cryptocurrency, but so far these institutional on-ramps leave much to be desired. As Sandler noted during the panel, Fidelity isn't crossing the nation looking to sell new institutions on bitcoin as a thesis. Many of these firms have independently decided to include bitcoin in their portfolios, but they've lacked the tools to do anything about it. 

Fidelity Digital Assets is not the only firm positioning itself as that key institutional on-ramp, but it benefits from name-brand recognition the overwhelming majority of its peers lack. Its ties to a 73-year-old financial institution with trillions of dollars under management probably doesn't hurt, either. Many traditional market players have already vetted Fidelity as a vendor, eliminating some of the hurdles other firms face.

To that end, Fidelity could be successful in growing the pie. But even Sandler admits there is more groundwork for the firm to lay before that can happen.