Nasdaq’s New Institutional Product for Digital Assets Is Crucial to the Crypto Market
On Sept. 11, Coindesk reported that Nasdaq, the world’s second-largest stock market, has been preparing crypto price analytics tools for institutional investors to facilitate increasing interest toward the market.
Bill Dague, Nasdaq’s head of alternative data, said:
“Given the abundance of interest, we are exploring cryptocurrency related datasets.”
However, he cautiously added that the plans of the company have not been finalized:
“Whether or not we launch a crypto-related product remains to be seen.”
Importance of Nasdaq’s Entrance Into Crypto
If Nasdaq formally pursues its plans to add cryptocurrencies to its Analytics Hub–a platform that leverages machine learning to evaluate data garnered from a variety of sources, including social media, to predict market movement–it will provide institutions with reliable market data.
To date, the Canadian multinational mass media and information firm Thomson Reuters is the only large-scale financial platform that provides cryptocurrency market data to investors in the broader financial market.
Sam Chadwick, director of strategy in innovation and blockchain at Thomson Reuters, announced last month that Eikon, a platform similar to Nasdaq’s Analytics Hub, has integrated cryptocurrencies through a partnership with CryptoCompare.
“We have been engaged with CryptoCompare since their involvement in our blockchain hackathon in September 2016, and continue to be very impressed by their approach to coverage of these challenging markets. This partnership puts pricing data for this emerging market alongside other asset classes, giving our customers a more comprehensive tradingview in Eikon.”
The difference between the integration of cryptocurrencies by Reuters and Nasdaq is that the latter incorporates machine learning and innovative technologies to reduce the pressure on institutions investing in an asset class still in its infancy.
The entrance of institutional investors into the cryptocurrency sector is expected to stabilize the market and the major cryptocurrencies within it, according to SFOX head of growth Danny Kim. However, an infrastructure has to be firmly established to handle the growing demand from institutions.
This week, Citigroup disclosed its intent to operate a crypto custodian solution through digital asset receipts (DARs) to assist large-scale investors in securely investing in the market with protection and insurance.
Goldman Sachs and companies within the cryptocurrency sector–including Coinbase and Gemini–have already started to bring institutions into the market.
As crypto custodian solutions gain trust from investors in the financial market and major banks solidify their plans to commit to the market, the asset class will see a level of stability not previously seen.
The last barrier between institutions and the crypto market is that custody has been eliminated in the past few months. However, without dependable market data and analytics tools–and given the criticism against existing data providers such as CoinMarketCap–it will be difficult for institutions to track the market.
As such, Nasdaq’s introduction of cryptocurrencies to its Analytics Hub is crucial to support the next wave of institutional demand toward crypto–if it materializes as billionaire investor Mike Novogratz noted.
Kim, meanwhile, told Business Insider:
“Before institutional firms were actively trading crypto or heavily involved (before 2018) bitcoin price differences between exchanges varied as high as 4.5 percent. Now price differences are no more than one-tenth of one percent.”
More to that, cryptocurrency exchanges have started to support high-frequency trading (HFT) firms by offering advanced connections to trading platforms (FIX connection), refining the market’s infrastructure to support a wider range of traders and investment firms.
“Some high-frequency trading (HFT) firms have been trading since crypto 2014, but have limited themselves because the infrastructure wasn’t there. Most if not all HFT firms require a FIX connection at an exchange in order to trade efficiently. Crypto exchanges haven’t offered FIX connectivity until recently.”
Institutionalization Nearly Complete
Nasdaq has not released its cryptocurrency market data platform and major banks have not fully committed to the market just yet. However, the moment these strictly regulated financial firms commit to the cryptocurrency market, analysts expect the market to see an influx of institutional demand that will ultimately stabilize the market, allowing digital assets to emerge as a major asset class.
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