Australian Digital Currency exchange, Independent Reserve has opened the first over-the-counter trading desk for institutions. While there has been significant retail interest in digital currencies to this point, the uptake from institutional investors has been much slower. As such, Independent Reserve’s new OTC desk, marks an important step forward for institutions looking to be involved in the digital currency space.
Digital Currencies have seen rapid growth in the past 12 months. The price of the leading digital currency, Bitcoin, rose to nearly USD$20,000 towards the end of 2017. While some of the other major digital currencies such as Ethereum and Ripple’s XRP, continue to gain more mainstream adoption.
The surging prices and high level of retail interest have seen institutional investors start to become more active in looking at the opportunities available in digital currencies. Increasingly digital currencies are beginning to become a viable alternative asset class.
However, to this point in time in Australia, one of the key issues for institutional investors has been the lack of block trading venues.
A New Opportunity for Institutions
Independent Reserve CEO Adrian Przelozny believes that the issues surrounding execution are one of the major barriers institutions have been facing and one of the reasons they have been slow to adopt digital currencies.
“Digital currency markets are just like any other asset class, in that when the market sees a big trade coming through it will move the price against whoever is making that trade,” said Adrian Przelozny.
“In equity markets, they solve that problem with dark pools and sales trading desks, but there is no digital currency equivalent in Australia as yet. By establishing an OTC desk with sales traders we’re able to connect institutions with one another, so they can trade without moving the market or getting price slippage,” he said.
Giving more opportunities for institutions to execute their orders easily, has been one of the major trends that we’ve started to see around the world. Recently Goldman Sachs’ backed OTC broker Circle, purchased Poloniex for US$400M, in a move that shows the interest we’re starting to see from institutions around the world.
Strong Levels of Interest
The Independent Reserve OTC desk is going to be operational by March 19 and Mr Przelozny said there are already strong levels of interest from institutional investors.
“We’ve expanded to include an OTC offering in direct response to demand from the local industry. By building the kinds of facilities institutions are used to having in other asset classes, we’re ensuring that any firm that wants to get involved can do so with improved risk management.”
While digital currencies have been growing rapidly worldwide, those levels of growth haven’t been as strong in Australia. Given the interest in the infrastructure and facilities that Independent Reserve is going to be providing, it appears that is about to change.
Mr Przelozny believes that Australia will now be well placed to keep up with the rest of the world, in the digital currency space.
“Now we have better facilities for institutions, I think this will change rapidly. I think participation from local institutions will soon match the much more active participation we see in digital currency markets overseas.”
Growing Exposure to Cryptocurrencies in Australia
Having access to better execution will benefit many of the new investment funds that have been set up on the back of the strong prices and investor interest. In recent months, we’ve already seen a number of new funds focused on cryptocurrencies, getting off the ground. They include Apollo Capital, Digital Currency Holdings, NEM.io, Digital Asset Fund and many others.
The institutions themselves are excited at the prospect of an OTC desk and the flexibility that will provide.
CEO of Digital Currency Holdings, Steve Bellotti, is pleased with how the world of cryptocurrencies is evolving in Australia and what that means for institutions.
“It’s fantastic to see Independent Reserve building out an institutional OTC capability in Australia. We see this service and offering as another exciting step for larger crypto investors and adding valuable liquidity to the overall market,” said Steve Bellotti.
Trading professional Tobias Abbey will lead the development of the OTC desk. Abbey joins Independent Reserve with a background as a highly experienced trader with more than ten years experience in global physical and derivative financial markets. He’s also been a leading advocate for digital currencies throughout the Asian region.
CEO of Digital Asset Fund, Richard Galvin believes the prospect of OTC execution will be a significant boost to digital currencies in the region.
“This is an excellent move by Adrian and the team at Independent Reserve and a great development for the regional digital asset marketplace. I commend them on getting someone of Tobias’ industry knowledge and experience to lead the effort and look forward to working with them,” said Richard Galvin.
Independent Reserve’s OTC desk is scheduled to be up and running by March 19.