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Nasdaq to launch their own crypto custody solution for institutions

Nasdaq to launch their own crypto custody solution for institutions

Cryptocurrencies have garnered a lot of attention over the past few years, much more so than the initial bull run crypto saw in 2017 and 2018. Bitcoin (BTC) is now seen by most as a store of value type of investment similar to gold.  

Now, Nasdaq Inc. (NASDAQ: NDAQ) is taking its first plunge into crypto, hiring a new group in charge of digital assets, according to a Bloomberg report on September 20, citing the firm’s head of North American markets, Tal Cohen. The initial milestone is to offer custody services for Bitcoin and Ethereum (ETH) to institutional investors.

Over the years, Nasdaq provided the technology to crypto market participants rather than creating a crypto exchange to be a competitor to Coinbase and other businesses. 

Custody solution

The advanced custody solution that Nasdaq Digital Assets will look to create will incorporate liquidity and execution services. The focus will be on the industry’s connectivity, availability, and efficiency issues, with an extra layer of protection and security. The offering is subject to regulatory approval. 

“Demand among institutional investors for engaging in digital assets has increased in recent years, and Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth.” said Cohen.

He also added:

“With our trusted brand and strong track record as a technology provider for the global capital markets, Nasdaq is uniquely placed to address industry pain points by improving liquidity, scalability, and resiliency, with the goal to engender greater trust and confidence in the digital assets ecosystem.”

Correlation of the markets

While stocks and cryptocurrencies are very different kinds of investments, for the many of the major ups and downs investors have seen in 2022, the stock market and cryptos moved in tandem. 

Currently, the correlation between BTC and other traditional assets is at its highest point, though a while ago, its correlation with the S&P 500 broke a record as well. 

Recent research undertaken by Kaiko indicates that high and volatile inflation is the main culprit for a positive correlation between bonds and risk assets over the past month, as inflation tends to lower all assets. 

“Bitcoin’s correlation with both bonds and equities has resumed its increase in September after declining over the summer. Inflation uncertainty coupled with Fed tightening has resulted in a historical decline in both risk and fixed-income assets, challenging traditional asset allocation approaches.”

Bitcoin’s correlation with traditional assets. Source: Kaiko

The bigger picture investors could consider when it comes to the alignment of stocks and cryptocurrencies is that it could be a positive development for the digital asset industry.

Cryptos are risk assets, and they’re trading in line with other risky assets, and the more integration they see in traditional portfolios, the higher the correlation with other asset classes will be expected.   

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