Tuesday, December 6, 2022

Brevan Howard develops his crypto business as institutional interest rises.

Brevan Howard, a hedge fund, announced on Monday that it is expanding its cryptocurrency business, the latest indicator that institutional interest in the asset class is growing.

Brevan, which is recognized for its macroeconomic bets, has been one of the most high-profile hedge funds to enter the realm of crypto trading, which is known for its turbulent markets and potential for large returns.

The asset manager announced the formation of BH Digital, a new division dedicated to the management of bitcoin and digital assets. It also announced that Colleen Sullivan, the current CEO of CMT’s digital unit, will head private and venture crypto investments.

Brevan’s expansion follows other high-profile money managers who have entered the market in recent months. Paul Tudor Jones, a hedge fund manager, has invested in bitcoin, and Man Group (EMG.L) markets bitcoin futures.

According to a report released by PriceWaterhouseCoopers, the Alternative Investment Management Association, and Elwood Asset Management, total assets under management of crypto hedge funds worldwide nearly doubled to $3.8 billion in 2020 from US$2 billion the year before.

Institutional interest is growing as a larger selection of cryptocurrencies become available, but bitcoin and ethereum, the world’s most well-known coins, are trading considerably below their all-time highs.

“What was initially seen as something of a fad now appears to be becoming a more permanent structure of the financial landscape and this has started to see what were initially fringe financial instruments moving to become more mainstream and very much forcing the institutional interest we are now seeing,” said Stuart Cole, head macroeconomist at London-based Equity Capital.

The rise in institutional interest has rippled over to the trading space. Eurex, Deutsche Boerse’s derivatives exchange, launched bitcoin futures on Monday to feed on the growing interest. Institutional interest in trading cryptocurrencies has risen this year, according to Coinbase, one of the world’s largest cryptocurrency exchanges.

Coinbase stated in its second-quarter letter to shareholders that cryptocurrency turnover reached a new high of $462 billion in the three months ending in June. Institutional investors traded $317 billion of this, while individual clients traded the balance. From the first quarter of 2018, when retail investors accounted for the majority of bitcoin trading, this ratio has flipped. While hedge funds and exchanges have rushed to capitalize on the movement, big banks have lagged behind, with their wealth management clients mostly pressuring them to offer bitcoin trading.

Citigroup Inc. (C.N) is exploring offering bitcoin futures trading to a select set of institutional clients, while Standard Chartered has established a cryptocurrency research section.

 

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