Crypto NFT

Fidelity wants to land in crypto and NFT trading

12/27/2022
Bitcoin Ethereum News

Fidelity has filed three official applications to register trademarks having to do with the trading of crypto and NFTs, as well as investment services in the metaverse. 

In particular, the company’s focus seems to be on the metaverse, where it could offer a wide range of investment services, such as mutual funds, pension funds, investment management, and financial planning. It also seems to be interested in payment services in the metaverse. 

In addition to that, it would also seem to be interested in providing trading services and crypto wallets also in the metaverse. 

Furthermore, Fidelity states that it might offer educational services within the metaverse, such as courses, workshops, seminars, and conferences in the field of investment and financial marketing. 

Additionally, it also seems to be interested in the NFT market, as it says it may launch its own online marketplace for buyers and sellers of digital media, i.e., non-fungible tokens. 

Fidelity in the crypto, NFT, and metaverse worlds

It has been years now since the giant Fidelity entered the crypto market, but from internal documents, it seems that the company has been a bit spooked by the bear market of 2022. 

Then again, during the previous big bull run, which was in 2017, it had not entered this market, so this is the first big bear market it has experienced since it entered this sector. Even though this is by far the least severe of the post-bubble bear markets that have happened so far in the crypto markets, it is easy for it to scare those coming from traditional markets where a -80% is a really bad sign. 

In crypto markets, a -80% post-bubble is actually not bad, since in the past two times it has been over -85%. 

However, the new interest in Web3 reveals that Fidelity has not lost interest in these technologies at all, and is just looking around for alternatives in case the crypto markets never rise again. 

In the meantime, it is calling for stricter and tighter regulation for crypto players, as it must have badly stomached the FTX fiasco. 

Fidelity Investments in the Web3 with crypto and NFTs

It is worth mentioning that Fidelity Investments is a true financial giant. 

It was founded in 1946 in Boston, and is by far one of the world’s largest asset managers with $4.5 trillion in assets under management and nearly 12 under administration. 

It has 57,000 employees around the world and manages a large family of mutual funds, as well as consulting, retirement services, index funds, asset management, securities execution and clearing, asset custody, and life insurance. 

A few years ago, it entered the crypto sector with its subsidiary Fidelity Crypto, which added cryptocurrency-related services to the above services. 

So far it has not yet entered Web3, but apparently, they have plans to expand into this new sector as well, particularly NFTs and metaverse. 

JPMorgan and the cryptocurrency market

Meanwhile, JPMorgan Asset Management’s head of institutional portfolio strategy, Jared Gross, said that cryptocurrencies are nonexistent as an asset class for most large institutional investors because the volatility is too high, and the lack of intrinsic return makes these investments very challenging. 

This scenario goes hand in hand with Fidelity’s disappointment with the crypto market in this post-bubble bear market. 

However, it is worth mentioning that Fidelity does not only offer services to large institutional investors because, for example, Fidelity Crypto itself also caters to retail investors. 

Hence, crypto markets as a whole still tend not to be generally considered particularly attractive to large institutional investors, perhaps precisely because of the high level of risk. 

However, a distinction should be made in this reasoning between Bitcoin and altcoins, because it is mainly altcoins that have a very high level of risk, which often makes them bets rather than real investments. 

Gross points out that in the past there had been some hope that Bitcoin could be a form of digital gold, or a safe haven asset that could provide protection against inflation, but this has not really happened.

This reasoning, while correct, is plagued by a couple of underlying misunderstandings. 

The misunderstandings about Bitcoin

The first concerns the concept of inflation. Indeed, Bitcoin does not protect against rising prices, but it does allow one to protect against massive and arbitrary increases in the monetary mass of fiat currencies. It is worth remembering that inflation once referred specifically to just that, i.e., the significant increase in the money supply that generally causes prices to rise. Only later did inflation come to mean instead the increase in prices itself, that is, the consequence rather than the cause. 

In this regard, it should be mentioned that when the Fed, and other central banks, started creating large amounts of money out of thin air again, after the March 2020 financial market crash following the onset of the pandemic, the market value of BTC was about $10,000. So since then, it has still prevailed by about 70%. 

Whereas the rise in prices started mainly in late 2021, which is when the last big post-halving speculative bubble burst. 

This makes it very clear that Bitcoin does not appreciate when consumer asset prices rise, but when central banks create a lot of money out of thin air and distribute it to the markets. 

The second misunderstanding concerns the comparison with gold. 

Bitcoin is not, and cannot be, an equivalent of gold. In fact, while gold is considered a risk-off asset, BTC on the other hand is obviously risk-on. 

It should be noted that when the Fed began flooding the financial markets with dollars created out of thin air in the spring of 2020, the price of gold reacted by +25% in a few months. But then, starting in April this year, it began to fall, such that it has accumulated an 8% loss between then and now. Compared to February 2020, the current market value is 14% higher. 

In contrast, Bitcoin in 2020 rose from $10,000 to $29,000, then soared in 2021 (i.e., the last post-halving year) to $69,000, peaking at +590% from its February 2020 values. Thereafter it lost 75% of its value, but remaining at +70% still from February 2020 values. 

Therefore, it is not appropriate to simply look at the performance of 2022, but rather to start the analysis from before the pandemic began, with all the consequences it caused. 

It is possible that this is still too far from the mindset of large institutional investors, for whom risk is a game not worth the candle if it is too high. 

Then again, Bitcoin has not been designed to make big booms over the short or medium term, although these have always been there to this point in the post-halving year, but rather is designed to combat the overly expansive monetary policies of central banks over the long term. It is enough to mention that the Fed’s current balance sheet is still 107% higher than it was in February 2020, with the current price of BTC still 70% higher than it was in the same period. 

Source: https://en.cryptonomist.ch/2022/12/27/fidelity-crypto-nft-trading/