Crypto Giants Embrace NewFi

BlackRock, a traditional institutional giant with $10.6 trillion in assets under management, has entered the cryptocurrency market.

The future of decentralized finance and its relationship to traditional finance, or TradFi, are the subject of intense debate among investors and industry participants as institutional interest in crypto continues to increase, fueled by the introduction of Bitcoin and Ether exchange-traded funds (ETFs) in the United States.

The debate’s central question is whether institutional involvement in crypto is a net positive or negative for the industry. In a recent interview with Cointelegraph, James Toledano, the chief operating officer of Savl, a custodial wallet platform, shared his perspective on the future of finance.

The executive contended that institutional involvement in cryptocurrency would benefit the asset class’s long-term growth, thereby providing the nascent asset class and the underlying technology a sense of legitimacy in the minds of apprehensive individuals, particularly in older demographics.

Toledano acknowledged the elephant in the room and the potential for these large institutions to dominate the crypto sector by controlling a majority of a digital asset’s supply.

Nevertheless, he stated that such a scheme was improbable, as “if they did that, they would be shooting themselves in the foot, as the majority of people would not want to own it.”

Rather, it is highly probable that self-custodial options will constitute the overwhelming majority of the market, while financial institutions will continue to coexist with decentralized finance, interacting with distributed protocols in what Toledano referred to as “NewFi,” or “new finance.”

“I think if institutions had like 20% of these assets and they were selling them as spot ETFs, or whatever, then 80% were in the hands of the public. It makes sense.”

Institutional inflows into crypto asset investment vehicles

Investors in the United States were the primary source of $1.35 billion in inflows into digital asset investment vehicles during the seven days, as indicated by the most recent CoinShares weekly inflow report, dated July 22, 2024.

On July 23, 2024, spot Ether exchange-traded funds were launched on United States stock exchanges, resulting in a daily trading volume of over $1 billion. This demonstrates the significant institutional demand for crypto ETF products.