Traditional finance is going down the cryptocurrency rabbit hole, more than you might think. Goldman Sachs, ICAP, JPMorgan and UBS have all purchased the first exchange traded product (ETP) that offers clients exposure to Polkadot's DOT cryptocurrency.
These banks and brokerage firms bought small quantities of shares in the Swiss-based ETP 21Shares. The stock debuted on February 4 on the SIX Swiss Exchange priced at $ 22-23 and has since climbed to $ 30.
There is not only Bitcoin
The purchases suggest that institutional investors' appetite for exposure to cryptocurrencies in the current bull market goes beyond the bitcoin market (quotation BTC in real time). The market cap of the DOT token is currently over $ 19 billion, making it the fifth largest cryptocurrency in the world. Born from an idea of Ethereum co-founder Gavin Wood, Polkadot is a blockchain network that supports various interconnected subchains called parachains.
To be clear, these customers are not investing in the DOT itself, but rather in a security that tracks its performance. They won't need to download special software to run a portfolio, and the ETP meets the mundane requirements of traditional investments, such as an international stock identification number.
“We have seen interest in cryptocurrency trading increase dramatically,” said Michael Lie, head of digital asset trading at Flow Traders, a crypto ETP market maker. "These products are an easy way to gain exposure to cryptocurrencies, without having to worry about custody."
How did things go
So far, Goldman Sachs has bought three lots of shares on behalf of a client, according to the data. UBS bought 2.770 shares, JPMorgan bought 500 shares, ICAP bought 1.000 shares, Bank of America's Merrill Lynch bought 2.200 shares.
Kepler Securities bought 550 shares, broker-dealer Instinet, owned by Japanese Nomura bought 9.280 shares and Flow Traders bought 6.897 shares.
A Goldman Sachs spokesman said he was unaware of the trafficking and would look into the matter. While the other companies have not made any comments for the moment.
There has also been an increasing number of ETPs listed on the SIX exchange. As of Jan.13, the exchange reported that there were six ETP providers with cryptocurrency products listed on the exchange, and the number of ETPs listed was 34.
The Polkadot ETP now has over $ 15 million in assets under management, said Laurent Kssis, Head of ETP with 21Shares. The company also operates the Crypto Basket Index ETP, which tracks the performance of five major cryptocurrencies.
On January 6, the UK's Financial Conduct Authority banned retail investors from accessing exchange-traded notes of cryptocurrency, another type of ETP, explaining that it considers the products too risky for everyday consumers. Despite the ban, Bloomberg data shows there is strong demand for crypto ETPs from large investors.