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1st December 2022 | Press Releases

TradFi offers safety from crypto winter

LONDON, December 1st 2022: Market turmoil caused by the crypto winter is strengthening the case for many institutional investors to use traditional regulated exchanges as their first route into digital assets.

This is the principal finding of a joint study by Acuiti and Eurex that has surveyed the views of 191 buy and sell-side firms on their views of the digital assets markets.

In the report, ‘Digital Asset ETNs: A Smoother Path to Cryptocurrency Markets’, Acuiti found that despite some firms’ taking to the native crypto markets, many institutions have remained cautious about how they trade the asset class.

This has led to many looking to gain exposure through the traditional venues where they already trade established asset classes, a trend that is likely to build in the next phase of the crypto market’s evolution.

This is particularly the case for institutions that want to trade exposure to digital assets but don’t need to optimise their strategies by trading against retail flow.

Institutional investors have taken a tentative interest in the cryptocurrency market thus far — both as the asset class embarked on its record bull market and as it entered the crypto winter of this year. This continued interest, despite price declines, has been one of the most notable features of the market this year.

However, the continuing price volatility of digital assets and more pertinently, the high-profile bankruptcies of several leading native crypto firms this year are leading to re-evaluations of how to integrate digital assets into institutional portfolios.

Once these institutions develop their trading strategies on traditional regulated exchanges they are likely to broaden their exposures benefitting the entire digital assets ecosystem.

Among the report’s key findings:

  • The slow pace of cryptocurrency regulation is pushing many institutions to gain consider gaining exposure to the asset class through traditional venues
  • Many concerns that institutions have with cryptocurrency markets are soothed when they start actively trading the assets
  • Sophistication is rapidly increasing in trading strategies, and this is driving the need for new products
  • These factors are turning focus to Exchange Traded Products, like ETFs and ETNs

When traditional exchanges first offered cryptocurrency derivatives to their clients, futures and later options were the dominant instruments for creating exposure. Since then, the diversity of products on these venues has grown, with ETFs and ETNs now available for clients to trade. This has increased the range and sophistication of trading strategies that can be enacted on traditional venues, adding to the existing advantages already on offer, such as central clearing and more solid regulatory foundations.

“A continued run of bankruptcies in the native crypto markets, including high profile names such as FTX, have given institutional investors cause to pause and reassess how best to add digital assets to their portfolios,” says Ross Lancaster, Head of Research at Acuiti. “Against that backdrop, the attraction of exchange traded products on traditional venues, which continue to grow in sophistication, is only likely to increase.”

To download the full report visit https://www.acuiti.io/eurex-acuiti-digital-asset-trading/




For more information, contact Ross Lancaster, Head of Research

Tel.: +44 (0) 203 998 9685

Email: rosslancaster@acuiti.io


About Acuiti

Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.