- Coinbase Custody solutions have become the top preference for firms looking to offer Bitcoin ETFs in the US, including Ark Invest’s BTC ETF
- Coinbase’s stock prices surged following the release of collaboration news with Ark
- Multiple Bitcoin ETF approvals could act as a single primary bullish driver for the COIN stock.
JAIPUR (CoinChapter.com) — COIN, Coinbase’s publicly trading equity stock, is down by almost 30% since the crypto exchange’s official IPO debut in April this year.
However, things look brighter for COIN as the race to launch the US’s first Bitcoin exchange-traded fund (ETF) heats up. Coinbase’s cryptocurrency custody arm, Coinbase Custody, has found active takers amongst firms pushing BTC ETFs. One of them is the Cathie Wood-led asset management company Ark Invest.
Coinbase Custody is a secure, offline storage solution that engineers designed to provide superior protection for digital assets. In addition, it has in-built support for almost all tradeable cryptocurrencies. As per reports, Coinbase stock prices rallied 8.3% after Ark declared Coinbase Custody as a custodian for its Bitcoin ETF. In addition, Valkyrie Digital Assets announced a partnership with the institutional crypto custody provider for its BTC ETF fund in January.
Unlike neighboring Canada, Bitcoin ETF approvals in the US have hit the snag every single time. It stems from the SEC’s concern regarding the efficacy of digital asset storage solutions provided by crypto custodians. However, Coinbase Custody seems to be playing the game right and looks firmly positioned to douse the SEC’s crypto storage doubts.
Institutional demand for Coinbase Custody surging
Since December 31, 2020, Coinbase has registered a 170% appreciation in its institutional holdings.
Reports point to growth from $45 billion in Q4 2020 to $122 billion in the back of Q4 2021. The cryptocurrency exchange currently boasts 8000-strong institutional clientele – hedge funds, asset managers, corporate, pensions, and endowments.
And the common thread tying them all, apart from their crypto investment affinity, is Coinbase Custody. A bevy of crypto-ETPs signed up with Coinbase’s storage solution to access cryptocurrency markets in a way that doesn’t require physically holding assets.
Drew Robinson, Head of Hedge Fund Sales at Coinbase, had this to say to Institutional Asset Manager,
“Over the last 12 months, we have seen a growing interest from institutional investors seeking to take advantage of the crypto space. However, this year, interest from pension funds and hedge funds has skyrocketed, supported by the roll-out of crypto-ETPs and an increased understanding of the crypto economy.
Ark Invest’s partnership with Coinbase Custody posted a near 10% green blip in COIN spot rates. But the above presents the long-term bullish scenario for Coinbase’s share prices mainly because the exchange’s surging institutional client base could lead the SEC to greenlight Bitcoin ETFs leveraging its custody solution.
But What if…
Coinbase Custody is a centralized crypto asset repository and hosts a single point of failure that hackers can leverage to access the large deposit of institutional crypto funds.
In such a scenario, the SEC’s worst fears about protecting crypto assets could come true, and in turn, play spoilsport for the cryptocurrency exchange and its stock price.