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Kraken, a well-known US exchange, officially announced yesterday the launch of an institutional custody service for crypto assets, designed to challenge Coinbase’s absolute dominance as the main manager of most spot Bitcoin ETFs in the USA.
Overall, Coinbase actually holds the BTC of 8 exchange traded funds out of 11 approved by the SEC in January, with a market share of 90% compared to the total AUM.
With this new institutional service, Kraken could slow down the expansion of its rival and become the preferred custodian of the upcoming ETFs that will be launched.
Meanwhile, the COIN title is unleashed and records a scary price increase in the midst of the Bitcoin rally. Kraken, on the other hand, is waiting to register its IPO, with a company valuation of $20 billion.
All the details below.
Summary
Kraken launches a new institutional crypto custody service: aims to take market share from Coinbase
Coinbase is accumulating more and more Bitcoin from the new funds traded on the stock exchange, but Kraken doesn’t seem to want to stand by and watch, launching a new institutional custody service to throw a spanner in the works.
The exchange itself announces it directly through its X profile “KrakenPro”, revealing very interesting details for the future of the cryptographic company.
Introducing Kraken Institutional, a comprehensive crypto solution that offers institutions all they need to engage in the digital asset-class.
— Kraken Pro (@krakenpro) February 27, 2024
Read Global Head of Institutional @Tim_Ogilvie's blog for more: https://t.co/gKaUMmORRg pic.twitter.com/k6EgIImKv0
Since the approval of the long-awaited Bitcoin spot ETF, a total of Wall Street Fund Managers have added over 302,000 BTC as AUM, not to mention the decreases in Grayscale’s holdings, which are becoming less and less significant.
Coinbase controls about 90% of the custody market for these funds by providing its support to 8 out of the 11 ETFs available in the US market, obviously earning management fees.
Kraken, a Californian rival of the platform by Brian Armstrong, is now trying to align with the market’s needs, given the high probability of new regulated emerging for investing in Bitcoin and crypto.
With the launch of the institutional custody service, Kraken positions itself as the main alternative to Coinbase in terms of delegation and supervision of funds purchased by issuers’ clients.
By doing so, you also reduce the risk of relying on a single institutional brand, which, as reliable as it may be, still represents a so-called “single point of failure,” potentially harmful to the health of the crypto market in case technical vulnerabilities were to emerge vulnerabilities.
As highlighted in an interview with The Block by Tim Ogilvie, institutional head of Kraken who oversaw the launch of the custody service:
“The approval and subsequent launch of bitcoin ETFs have only highlighted the need for a wider range of custody solutions. The upcoming launch of Kraken Custody is timely to overcome the potential concentration risk with multi-party custody, diversifying the risk of the ecosystem relying on a single custodian”
At the moment, the only ETF providers that do NOT rely on Coinbase are Fidelity, Vanck, and Hashdex: the first has decided not to delegate the custody of its clients’ assets to a third party, opting for the “self custody” option while VanEck and HashDex have chosen Gemini and Bitgo as custodians respectively.
Grayscale, BlackRock, Ark, Bitwise, Invesco, Valkyrie, Franklin Templeton and WisdomTree are all affiliated with the largest cryptocurrency exchange in the USA.
Kraken in the press release announcing the institutional service, reiterated that it will target large financial investors, including institutions, asset managers, hedge funds, and individuals with high net worth, excluding retail investors who can directly use the spot market to purchase crypto within the exchange.
Anticipating the development of the cryptographic sector in the United States and the launch of new Bitcoin exchange-traded fund issuers, Kraken is ready and pushing to capture a very important portion of the market.
Meanwhile, the main protagonist of this whole story, namely Bitcoin, continues undisturbed in its bullish rally, pushing for an increase in trading volumes, which on Monday reached a new record on as many as 9 different ETFs, with BlackRock surpassing the $1.3 billion threshold.
COIN: Coinbase’s stock soars along with Bitcoin’s rally
As competition grows between Kraken and Coinbase for the management and custody of crypto assets in the new Bitcoin exchange-traded funds, the COIN stock shows all its strength and sets a new annual high.
On Monday the stock of the US exchange, whose price action is highly dependent on that of BTC, closed the day with an extraordinary +16.85% going from 168 USD to 194 USD.
Yesterday, the pressure from the demand was felt at the opening of the Nasdaq, with buyers pushing COIN up to 209 USD, then registering a slight decrease at the close of the trading sessions.
Today, however, the premarket indicates a price higher than yesterday’s high, signaling the possibility of starting this day with a bang, continuing a bullish trend that started in January 2023 but accelerated significantly since the beginning of the year.
In total, since reaching its minimum in 2023, Coinbase’s stock has seen a price increase of about 500%.
However, it still remains in a drawdown of -45% compared to the historical highs recorded in the first week of trading.
On the technical analysis front, we can easily see how at this moment COIN is approaching a key level, namely the $200 level, which could serve as a possible reversal point for a correction.
This price in 2022 was an important resistance, which triggered the violent leg down that brought the stock into a deep red zone at the end of the calendar year.
If COIN manages to rise above 200 USD again next week, then the stock could easily reach near 250 USD.
The netflow metric of ETFs must be monitored, as the more inflows there are, the more Coinbase earns commissions thanks to its role as an institutional custodian.
Furthermore, obviously the price trend of BTC will also be crucial in determining which scenarios belong to the exchange’s stock.
For the moment the situation is super bullish and all indicators highlight the positive momentum: however, be careful of possible flash crashes now that speculative interest in the sector is high with the funding rate on BTC derivatives at high positive rates and growing OI.
While COIN reaches new annual highs, we remind you that Kraken is not yet listed on the stock exchange, but it could make the big leap soon with an IPO.
Investors believe that Kraken will become a publicly traded company starting from June 2024, but no official announcement has been released yet by the company, which is valued at 20 billion dollars.