How institutional investors can gain confidence to trade digital assets in the long run

Mention cryptocurrencies and one image that comes to mind for many investors is a volatile digital asset prone to speculation and short-term price swings.

Those who play the long game and adopt a macro approach to invest in popular cryptocurrencies such as Bitcoin and Ethereum have seen high potential in these assets despite their price swings, compared to traditional assets.

GIC, DBS and Standard Chartered Bank are among many financial institutions making inroads into the crypto market today.

Across the United States and Europe, 36 per cent of large institutional investors own digital assets such as Bitcoin, according to a study by Fidelity Investments last year.

A Bloomberg report also revealed that in the United States, different types of institutions, including pension funds, family offices, investment advisers and digital and traditional hedge funds, have invested in cryptocurrencies

As the digital economy expands and serves as a key engine of growth during the pandemic, digital assets are becoming ever more valuable as an alternative to traditional assets such as equities or derivatives.

Nevertheless, investors invest in digital assets with different objectives in mind - to diversify their investment portfolio and hedge against traditional capital markets.

Given the underperforming capital markets globally, digital assets are increasingly seen as an attractive alternative investment channel.

A recent survey of 100 hedge funds by fund administrator Intertrust found that they expect 7.2 per cent of their assets to be in cryptocurrencies in five years' time, according to the Financial Times.

Mitigate risks by selecting the right partner

There is a considerable number of crypto trading platforms in the market, but few of them are licensed and regulated to safeguard investor's rights.

A trusted platform would adhere to institutional-grade know-your-customer, know-your-business and anti-money laundering standards, for starters.

Investors would also need to do some research to identify the right partner and minimise risks, because financial transparency is not as common among cryptocurrency trading platforms as those used for traditional trades.

Says Mr Ryan Rabaglia, global head of trading at OSL: "The regulatory clarity has come to fruition in key jurisdictions, creating an environment that allows institutions and investors to gain exposure to digital assets with confidence. This is another element of the current rally - institutional participation and asset allocation."

For accredited and institutional investors who invest in more substantial volumes, it is crucial to pay closer attention to how the platform manages its books.

Also important is whether a platform supports secure digital wallets, which you need to access your digital assets. It is crucial to find one that supports digital wallets with military-grade security, especially for those who trade frequently. This can be instrumental in protecting your digital assets from cyberattacks and accidental damage.

Entry of Hong Kong-listed group

OSL Singapore is the Singapore sister-entity to the Hong Kong SFC-licensed OSL Digital Securities.

It is part of the Hong Kong-listed BC Technology Group, which received a US$70 million (approximately S$95 million) investment from Singapore's sovereign wealth fund, GIC, through a private placement in June. Its commitment to Singapore's burgeoning digital asset industry has not happened overnight.

OSL set up an office in Singapore in 2019. The company is currently operating under a license exemption by the MAS.

In December last year, OSL and its parent BC Group announced that they will be providing technology services to DBS bank. The company also plays an active role in the Singapore Fintech Association.

Singapore is becoming an important hub for digital assets, and many institutional investors are looking forward to a safe and trusted way to trade in these new asset classes, says Mr Kanny Lee, head of Singapore, at OSL.

Digital assets lending and borrowing services

Instead of letting the digital assets sit idle in a digital assets platform, institutional investors can look to generate yield on, say, Bitcoin by lending the asset to the market. The demand for lending and borrowing of digital assets in Singapore is surging and such unique service is possible with a prime broker like OSL that helps to link up borrowers and lenders in an expanding marketplace with high liquidity.

Ultimately, OSL offers institutional investors the confidence to trade on digital assets in the long run.

As Singapore emerges as a leading digital asset trading hub in the years ahead, OSL is positioned to be a partner of choice for institutional investors seeking to enter the digital assets market in a reliable, secure and compliant manner.

Find out how OSL's prime brokerage services enable institutional investors to trade digital assets with confidence here.

Disclaimers

1. OSL SG Pte Ltd (The Company) is exempted by MAS from holding a licence to provide Digital Payment Token (DPT) services. Please note that you may not be able to recover all the money or DPTs you paid to The Company if The Company's business fails.

2. You should not transact in the DPT if you are not familiar with this DPT. Transacting in DPTs may not be suitable for you if you are not familiar with the technology that DPT services provide.

3. You should be aware that the value of DPTs may fluctuate greatly. You should buy DPTs only if you are prepared to accept the risk of losing all of the money you put into such tokens