Coinbase Tries to Reel in Institutional Investors

Coinbase, the most popular U.S. platform for buying and selling bitcoin, has launched a handful of new products designed to attract institutional investors to its digital currency trading service. 

The Silicon Valley company is rolling out four new products aimed at targeting the group that has been the most hesitant to dive into the volatile cryptocurrency market. “We think this can unlock $10 billion of institutional investor money sitting on the sideline," said Adam White, Coinbase's vice president and general manager. "We're seeing a rapid increase in attention, awareness and adoption in the cryptocurrency market."

Coinbase, backed by investors such as Andreessen Horowitz, Union Square Ventures and the New York Stock Exchange, says it has traded $150 billion in assets on its platform with more than 20 million customers. (See also: Coinbase Has More Users Than Schwab.)

'Very Few Want to be First'

The number of crypto-hedge funds has jumped from just 20 in 2016 to 287 currently, according to  fintech research firm Autonomous NEXT, as reported by CNBC. Big banks such as Goldman Sachs Group Inc. (GS) have been experimenting in the space, as the Wall Street firm was the first to open up a cryptocurrency trading operation offering forward bitcoin products to clients. "Very few want to be first, but everyone wants to be second," said White. "There will be fast followers."

Institutional investors have been wary of crypto trading due to the speculative nature of the market. Bitcoin's 1,300% surge last year was attributed mostly to demand from retail investors, as the world's largest cryptocurrency by market capitalization and its rival digital coins have been shunned by mainstream financial markets due to several issues such as regulatory concerns and security flaws. 

New Crypto Services

Coinbase Custody seeks to fix asset custody problems by partnering with an Securities and Exchange Commission (SEC)-regulated broker-dealer for third-party auditing and financial reporting validation. The new product will store cryptocurrency for clients, easing concerns about lost or stolen funds having little or no possibility of recovery. Coinbase Prime will serve as a separate platform designed specifically for institutional investors, while Coinbase Markets will serve as an electronic marketplace run out of a new office in Chicago. 

A fourth product, Coinbase Institutional Coverage Group, based out of New York City, seeks to offer the "white glove" customer service that institutions like banks are accustomed to and will work on selling the service to new investors and onboarding new clients. (See also: Bitcoin to Hit $20K, But Bet on Ethereum: Ohanian.)