by Joseph Young
Fidelity Investments, one of the largest financial services and investment firms in the US with over $2.13 trillion assets under management and $15.9 billion annual revenue, has announced the integration of Coinbase. According to Fidelity CEO Abigail Johnson, its clients will be able to see their investments in bitcoin and ether on Fidelity’s main platform by the third quarter of 2017.
Since the beginning of 2016, both institutional and casual investors have begun to perceive bitcoin as digital gold and a safe haven asset. Prominent investors including the founder of precious metal broker GoldSilver.com, Mike Maloney, have encouraged investors to purchase and hold bitcoin to avoid inevitable economic uncertainty and financial instability.
Emphasizing bitcoin’s decentralized nature and its transportability, high liquidity and transparency, Mike Maloney explained:
“You want to have an alternative monetary system that is already ready to go and those actually exist today. They are called cryptocurrencies. It started with Bitcoin. There have been several others that have been introduced. I own a few of them. I don’t own a lot of cryptocurrencies, but I think it is something that is necessary to be prepared because if the monetary system fails, you’ll be able to do transactions right away with other people and you can do them over long distances.”
Large-scale investment firms and financial service providers such as Fidelity Investments have also realized the importance of bitcoin as a mandatory asset to protect the wealth of clients amidst severe economic instability. Because the value of bitcoin solely depends on the supply and demand of investors within the market, the decline in the value of stock markets, bonds and currencies do not affect bitcoin negatively.
Speaking of this unique market-based value of digital currencies such as bitcoin and ether, Johnson stated at the New York Consensus event:
"I love this stuff – bitcoin, ethereum, blockchain technology – and what the future holds.”
The investment firm is also highly optimistic about the potential of Bitcoin and Ethereum outside of their on-chain capacity and transactions. Over the past few months, the firm has allocated its resources in the development of two-layer solution-based micropayments platforms for both bitcoin and Ethereum to establish an in-depth knowledge in the two leading cryptocurrencies.
Unlike the vast majority of investment firms that are allocating client funds in cryptocurrency portfolios without actual knowledge in the purpose, economics, structure, vision and technical specifications of certain cryptocurrencies, the team behind Fidelity is actively investigating the potential of Bitcoin and Ethereum and their underlying technologies such as the Lightning Network and Ethereum’s smart contract protocol.
"We have built proofs of concepts that accept bitcoin micro-transactions. We set up small bitcoin and ethereum mining operations, just done in the spirit of learning,” said Johnson.
Most importantly, Fidelity and its team have been using bitcoin internally to understand its payment mechanisms including transaction verification duration and transaction fees. Without transacting with bitcoin, it would be difficult and impractical to recommend clients to invest in bitcoin. Hence, Fidelity has been using bitcoin by accepting the cryptocurrency at its cafeteria. Mining is also another avenue of exploration, where Johnson also stated that her computer had mined over 200,000 Satoshis and 21 Inc. helped the firm setup the hardware.
Johnson explained that around 100 employees have already used bitcoin to purchase food at the firm’s cafeteria. She further noted that Bitcoin’s capacity is not even close to that of the Visa network and other centralized networks. However, with appropriate scaling and technologies as Lightning, she explained that Bitcoin would mature over time.
"If you are looking for bitcoin to beat Visa at the point of sale today, you are going to be disappointed. If you are looking at this technology as just a faster settlement system for financial transactions... also disappointing. But I am still a believer – and it's no accident that I'm one of the few standing before you today from a large financial services firm that hasn't given up on digital currencies.”