What can drive mass adoption of crypto in 2019
The study polled 1,000 adult investors who currently do not own any cryptocurrencies directly but trade in traditional stocks through brokerages. The cryptocurrency sentiment here indicates that these investors are already eager to enter the cryptocurrency market, and even willing to scale back on current holdings in order to invest more heavily in cryptocurrencies. Yet, many of those polled showed signs of hesitance when asked if they would be willing to leave their current brokerages. What is it that traditional brokerages can offer that exchanges can’t?
What is ‘great’ about brokerages?
According to the study, the three most popular brokerages include Fidelity at 17 percent, E-Trade at 16 percent, and TD Ameritrade at 11 percent. A surprising 52 percent of traders said they would invest in cryptocurrencies if their corresponding brokerage offered such a service. So why don’t these popular brokerages take advantage of this?
It is assumed that they will. For instance, Fidelity has announced a new and separate company called Fidelity Digital Asset Services, which handles custody for cryptocurrencies and executes trades throughout multiple exchanges. However, it is not yet known whether this new service will be integrated with Fidelity’s traditional stock investing platform.
In addition to Fidelity, E-Trade and other brokerages have displayed enthusiasm in cryptocurrencies, but have yet to implement them into their current systems. 59 percent of investors who said they would invest in cryptocurrencies if a system was offered by their brokers, went on to say that they would even scale back on stock investing in order to invest more into cryptocurrencies. If these traditional investors are so interested in trading, why not work with a cryptocurrency exchange?
What is ‘wrong’ with crypto exchanges?
According to the study, a measly 14% said they wouldn’t be comfortable trading on a cryptocurrency platform. Why is this? It may be related to large exchanges such as Mt. Gox being hacked in the past, which was also widely reported, casting a terrible image over cryptocurrency exchanges and trading. The Mt. Gox hack caused a loss of about 740,000 bitcoins in 2014. Out of those 740,000, only 200,000 would eventually be recovered, meaning 650,000 bitcoins were never recovered.
Other cryptocurrency exchanges that were hacked in the past include Bitfinex, Coincheck, BitGrail, BTC-e, as well as many others, resulting in the loss of millions of dollars worth of cryptocurrencies. Although Coinbase claims to never have been hacked, reports of theft often arise from its users. However, it’s important to mention that cryptocurrency thefts often have little to do with the exchange itself, and more to do with negligence in the user community.
Path to institutional investment
Compared to stocks, cryptocurrency markets are still relatively new, therefore not all investors still fully comprehend them. The science behind cryptocurrencies can be complex and often times difficult for traditional investors. Why invest in something you can’t comprehend? Until a brokerage fully adopts cryptocurrencies into their systems, it is not likely that traditional traders will consider moving to another platform. Companies like Fidelity, which was established in 1946, have been working in investment for years, and investors are looking for their level of service and security in order to enter the space.
“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors,”
said Abigail P. Johnson, Chairman and CEO of Fidelity Investments in the official press release connected with the launch of the Fidelity cryptocurrency trading platform.
“We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”
Industry experts cite that Fidelity will establish the foundation for institution-quality solutions, which would drive more mass interest in cryptocurrencies with other brokerage firms to follow. We will most likely see a rise in traditional stock traders entering the market already in 2019, which is bound to be a very exciting year for the crypto industry.