Fintechs Move to Address Security and Volatility of Investing in Bitcoin

A lot of money is moving in the volatile world of cryptocurrency. Just today, Bitcoin surpassed the $11,000 mark—and institutional money, from hedge fund managers to sovereign wealth funds, want in on the action.

Last week, Swissquote Bank, a Swiss-based online trader, launched a bitcoin exchange-traded certificate. The new product, dubbed the Bitcoin Active Certificate, will attempt to curb the volatility of the digital currency by switching user investments between bitcoin and U.S. dollars using machine learning. The algorithms will interpret buy/sell pressures and analyze social media sentiment to forecast short-term market activity of the digital currency, according to Bloomberg. Trading will take place on the SIX Swiss Exchange.

Cryptocurrency trading and exchange platforms stand to gain a lot if they can convince hedge funds and other institutional investors that they offer legitimate and secure products for cryptocurrency trading.

“Investors are excited about the cryptocurrency but are unnerved by its volatility,” Peter Rosenstreich, the bank’s head of market strategy, said. “So we tried to build a trading algorithm that’s a protection against downside risks.”

Where Swissquote Bank is up playing its innovative trading technology, Coinbase is leveraging its longevity as a player in the market to attract institutional clients. Earlier this month, Brian Armstrong, the CEO and co-founder of U.S. cryptocurrency exchange Coinbase, announced the launch of Coinbase Custody, a product intended to service institutional investors.

“Coinbase is well positioned to launch this product. We already store billions of dollars worth of digital assets on behalf of our customers,” Armstrong wrote on Medium. “Our goal with Coinbase Custody is to help dramatically accelerate the flow of institutional money into digital currencies over the coming years.”

According to the Medium post, Coinbase Custody is only available to institutional investors with a minimum of $10 million in deposits. The product includes an initial setup fee of $100,000, and an additional fee based on customer assets.

Cadence is a fintech reporter and writer at Fintech Unltd, where she covers the changing landscape of financial technologies. Previously, Cadence interned at Psychology Today, Business Insider and the Wisconsin State Journal. Cadence is interested in how science and technology intersect with power and culture and is curious about the world we are creating for tomorrow, consciously or not. She graduated from the University of Wisconsin–Madison in 2017 with degrees in Journalism and Chinese. Send tips and story ideas to Cadence at [email protected] You can also follow her on Twitter @cadencebambenek.