Over the past decade, the digital asset ecosystem has encountered numerous hurdles and fluctuations but ultimately proved that crypto assets are here to stay. Institutions are investing for the long-term, and market adoption has shifted globally, with digital assets becoming a more mainstream asset class.
For institutional investors looking to diversify and differentiate, digital assets can now be seen as an alternative to gold or a hedge against inflation. In some emerging markets (e.g., Cuba, El Salvador), digital assets are even becoming legal tender. If you believe that much of the world’s value will be tokenized in the coming years, crypto is the first use case of that.
Prior to 2017, the crypto market capitalization was less than $20B. Toward the end of 2021, we saw it peak at more than 2.8T. Today, the market has come down from its 2021 highs, but has hovered around the 1T mark for the past several months.
Institutions Looking to Add Digital Assets to Portfolios Require Technological Innovation
According to EY, approximately one-third of hedge fund managers plan to add crypto to their portfolios in the near future, and Financial Times reports that hedge fund CFOs expect to hold roughly 7% of their assets in crypto in five years' time, which equates to about $312B in digital assets across the industry.
Despite this trend, the financial technology market for digital assets is still dominated by retail platforms unable to handle the scale that comes with serving large financial institutions.
Current retail platforms also lack consolidated, seamless workflows, making it difficult to execute trading, credit, and clearing on a single platform.
In addition to lacking scale and functionality, retail platforms deploy fee structures that make it expensive to move institutional size orders, making them a less than optimal technology option for institutional managers.
Technological innovation is essential before institutions can adopt digital asset trading on an even larger scale. With crypto investment strategies at a tipping point, it’s time investment platforms offer a solution to manage institutional digital asset operations. And these solutions need to look, feel, and operate like the ones managers know and use today, giving them the same institutional-level performance they rely on when managing more traditional asset classes.
What to Look For in an Institutional Crypto Trading Platform
- The ability to trade large sums of digital currencies through dark pools and market makers with access to institutional-sized liquidity
- A crypto trade ticket with broker-specific RFQ workflows that allow traders to configure order details and request buy and sell quotes for selected token pairs
- A true, open architecture and broker-neutral network enabling firms to trade with whichever execution venues they need
- Expert client support through both the institutional trading platform and the executing venues
SS&C Eze’s Institutional Digital Asset Trading Solution
Eze EMS is the first Tier 1, multi-asset execution management solution to bring crypto trading to institutional asset managers. Our crypto trading network provides an open, broker-agnostic framework enabling us to provide firms access to the trading venues they need to stay ahead.
Eze EMS allows firms to trade large crypto orders through tight integrations with leading institutional digital asset execution platforms. And with its advanced trading engine and a crypto-specific trading window, Eze EMS gives firms access to institutional liquidity and trading tools for dynamically managing positions, portfolios, and trading risk across digital currencies.