Crypto Investment and Trading Strategies Used by Coinbase Institutional Clients

Last week, Coinbase’s Lucy Jane Taylor, who does institutional sales, trading, and prime brokerage, talked about the different crypto investing and trading strategies her firm’s clients use.

Taylor’s comments were made during a very interesting panel (titled “Where Is Institutional AUM Going Next?”) moderated by James HarrisChief Commercial Officer at leading digital asset market data provider CryptoCompareThis year CryptoCompare Digital Asset Summit (CCDAS), held in London on March 30.

Taylor began by explaining what products and services Coinbase provides to institutions:

So, taking a step back, we launched Coinbase Guard in 2018, and at that time there were two standalone products. There was cold storage and there was exchange for trade. In the fall of last year, we launched Coinbase Primeand it’s a global prime broker solution, and there are four key pillars to the product.

The first is multi-site execution through a smart order router, which means institutional clients can contract with one counterparty and that’s Coinbase, but they can access aggregate liquidity from a number regulated exchanges and OTC desks.

We can offer algos, and we act on an agency basis. The second part is custody – therefore cold storage. We are a regulated custodian – regulated by the New York Department of Financial Services, and we can offer such services, such as direct out of custody staking, which is very unique to the offering.

The third part is trade finance. So we designed solutions to help clients offer a post-trade line of credit. So if you have your assets in cold storage and you want to trade those assets but you actually don’t want to put them back in your trading portfolio, we can give clients a pre-agreed line of credit and then they can just settle net at the end of the day. We can also offer loan-borrowing.

And then the fourth part of the Prime offering is data and analytics. We acquired a platform called Skew – that was in 2020… We integrated it into the Prime platform, and now we can offer clients charts and data not only on spot but also on derivatives .

And when Harris asked Taylor to share stats to show how their institutional business has grown, Taylor said:

In full year 2021 and as of December 31, 2021, we had 11,000 institutional clients. As mentioned, assets in custody for institutions are $137 billion, and that’s very interesting because the same number for the year 2020 was $45 billion.

In terms of assets we support on the platform, 170 assets for custody and 158 for trading. And in terms of trading volumes, I find this statistic interesting: the full year gross trading volume for 2020 was $120 billion. And the same figure for the year 2021 was $1.1 trillion.

As for what Coinbase institutional clients are doing, Taylor had this to say:

The Coinbase exchange is direct access to low-latency liquidity from Coinbase. Now this is mostly used by market makers, prop shops etc. and they normally use some kind of market neutral strategies. If we step outside of the exchange and look at Prime… I can go into more detail on specific customer segments.

So if we look at hedge funds, you know, global macro funds generally trade on the basis. We’re looking at multi-strategy funds, which take directional positions, and we’re now starting to see systematic funds looking at that as well.

And then more broadly, if we look at family offices – and they’ve actually been in the crypto space quite a while because their mandate is obviously to preserve generational wealth – millennials are now starting to get involved in their family offices. So, they could generally be pro-crypto, and their strategy is more buy and hold.

We also have introducing brokers on the platform. So it could be challenger banks, private banks, regional banks, and they use the infrastructure via maybe as a white label solution. And then, finally, what is also interesting are the companies. So corporate treasuries are looking at NFTs, and also, you know, payroll services for example and yield-generating strategies, like staking.

The roundtable begins at approximately 2:30:30 in the video above and ends at 3:09:20.


The views and opinions expressed by the author, or anyone mentioned in this article, are for informational purposes only and do not constitute financial, investment or other advice. Investing in or trading crypto-assets involves the risk of financial loss.

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