While developers continue to build out the infrastructure of the crypto economy, many others are turning the bear market into ground zero in preparations for the next bull run. In their Q3 report, for instance, Grayscale investments described this inflow of institutional money pouring in and making positions in the market. Another smaller demographic, made up by firms like Wilshire Phoenix, are also making similar bets and shifting much of their focus toward the crypto verse.
Coinbase Custody and Attracting Institutions
The most significant recent news to come from the small investment group was their October 31, 2018, announcement to partner with Coinbase Custody. The two will reportedly work towards a “mid-December” deadline before launching a statutory trust for institutional clients. CEO William Herrmann told BTCManager that everything is on track and only a “meteoric” change of events could disrupt the timeline.
The trust will expose high-net-worth individuals, or those with $1 million in liquid financial assets, to the crypto markets. The idea is to mitigate risk as effectively as possible while still capturing some of the massive gains. The recent narrow trading channel witnessed the last few months is also indicative of some soon-to-arrive instability. To combat this upcoming disruption, Wilshire and Coinbase will release a variety of volatility retardent. Herrmann explained:
“In Bitcoin, or any asset class, long periods of stability lead to sudden instability. This is exactly why we created this product, to protect investors during periods of extreme and sudden volatility.”
More importantly, this will be achieved without the use of derivative products or leveraging holdings, which is another first for the industry. Herrmann said:
“While at the same time enabling investors to participate in the crypto markets without the use of complex derivative products. And, unlike some other products, we are physically holding Bitcoin with the assistance of our Institutional Custodian, Coinbase. As opposed to more complex and costly approaches, such as the use of cash settled futures or any use of leverage.”
Still, formal guidelines, such as the Generally Accepted Accounting Principles (GAAP), have kept interested parties on the sidelines. Herrmann said, “With the partnership with Coinbase, all operations made through the trust can be kept on the books. This is very interesting to institutional investors.” Regarding the reasons behind working with Coinbase, the CEO iterated the knowledge-base and security of Coinbase as “best-in-class.”
Financial Hires and the Art of Pivoting
Alongside an industry-wide demand for standards between traditional finance and emerging digital assets, is also the conversion of employees from legacy sectors. This fact is all the more true in finance, and Herrmann has been busy building out a team that boasts experience from JP Morgan and Columbia University Medical School. In August 2018, Wilshire brought on Garrette Furo, a proclaimed “crypto native,” as partner and CIO of the investment firm. At the time, Furo told MarketWatch:
“As the traditional financial landscape and wealth-generating client base continue to rapidly evolve, Wilshire Phoenix is positioned to lead and has a forward-thinking mentality that few others in this space possess, let alone are willing to execute on.”
A November 8, 2018 press release also outlined the hire of Alexander Chang and William Cai who both bring nearly 20 years of experience working at J.P. Morgan. In sum, Herrmann assembled a team made up of high-caliber financial experts and actionable crypto experience, along with partnering with one of the biggest names in the space in two months.
Wilshire doesn’t want to be confused with another crypto-fund; many of these hires and partnerships are merely part of a larger plan to take digital assets as seriously as the rest of the market. Touching on this point, Herrmann underlined this point when explaining the upcoming trust:
“We are able to achieve this through a novel method, which I am eager for the world to see. Our innovation may also be applied to other Alternative Assets, it’s going to be a really exciting next few months.”
Come December; it’s likely that many in the industry will be paying very close attention to Wilshire Phoenix. Their success could spell the onboarding of anxious institutional capital and the ability for old heads to take bitcoin seriously.