Coinbase announced via a Medium blog post that the Coinbase Custody division will be evaluating the addition of 37 more coins, including Dash.
Coinbase Custody was started this past July 2 to be “a custodial service for institutional clients optimized for storing large amounts of cryptocurrency in a highly secure way.” The service includes “segregate[d] cold storage”, “financial and security controls”, “dedicated coverage”, “insurance”, and “multi-user accounts”, according to their website, to adapt to the requirements of institutional investors.
Their post did stress that this would be for “storage only” and that they “have not yet considered these assets for trading”. Coinbase added that they made the announcement internally and publicly at the “same time to remain transparent with our customers about support for future assets”. The post continued to highlight that this is still a developing process and that no commitments have yet been made.
“As part of the exploratory process, customers may see public-facing APIs and other signs that we are conducting engineering work to support these assets. While we cannot commit to when or whether these assets will become available on Coinbase Custody, we will provide updates to our customers about the process and what they can expect via our Twitter account.”
The post further discussed that addition to Coinbase Custody does not mean that coins might get added to active trading since they still “must pass [their] Digital Asset Framework”.
Institutional investors seek long-term returns
The recent popularity of cryptocurrencies have garnered interest from institutional investors seeking returns for their clients. However, due to their structure and need to comply with traditional financial laws, they cannot immediately invest in cryptocurrencies the same way as average consumers. Instead, these custodial services provide a gateway for institutional investors with services that they are accustomed to such as third party asset management by safely storing it cold wallets and also providing insurance against the investment. The increase in demand for cryptocurrencies by institutional investors can be see by how Coinbase has been expanding their custodial services and how others, like Goldman Sachs, are considering similar ventures.
Previously, Dash Force News discussed how these custodial accounts provide a gateway for larger investors to enter the cryptocurrency space, which then creates more confidence in cryptocurrencies and encourages even more individuals and institutions to enter the space. However, these institutions still have a fiduciary duty to their investors to pursue the best possible returns over time. To do so in the relatively volatile cryptocurrency space, they will need to justify their investments with proof that a coin will increase in value and exchange price over the coming years.
Among many of the top cryptocurrencies, supply is fixed, so exchange prices will increase as demand increases by simple laws of supply and demand. Then as coins build their userbase and everyday usability, their values will increase, as more consumers will adopt these cryptocurrencies to use in their everyday lives to purchase goods and services. Since institutional investors will be buying these coins to hold with custodians, they will most likely seek out cryptocurrencies that have a high probability of achieving these attributes because they will not be actively day trading these coins. While less trading does hurt market price discovery, it also decrease volatility to a degree. Institutional investors will seek out cryptocurrencies that have a history of achieving the goals mentioned above and a roadmap of continuing doing so into the future.
Dash provides strong evidence of long-run growth
Dash has been demonstrating its ability to grow its consumer and merchant base by focusing on everyday usability. This makes Dash an attractive investment for institutional investors since they can be confident that Dash is structured to steadily and sustainably grow its exchange price and value. Proof of this is already being seen by the actions of Fidelity, the large investment firm, which has a 15% stake in Neptune Dash, the publicly traded fractional Dash Masternode ownership company. It can also be seen when you evaluate Dash based on its fair value, which is derived from actual usage in everyday life by consumers.
Dash has been able to maintain this focus on everyday usability because of its unique structure that enables proper economic incentives. Dash leverages this structure to create record low transaction costs to enable Dash to be, primarily, a decentralized peer-to-peer digital currency payments system for individuals around the world. This focus on everyday usability gives Dash value as a usable currency and thus further supports its exchange price, which gives a strong argument for adoption by institutional investors through custodian accounts. As more investors adopt Dash, this makes the network more robust and creates further confidence in Dash, which leads to further adoption by investors, merchants and consumers.