Crypto Trading with Regulation-First Approach: Our Investment in One Trading
If you've had any access to the internet this past year, you already know that the crypto world has been through a lot. Wild volatility, a “crypto winter,” record peaks, bankruptcies, and bad actors just to name a few. It’s been a complete rollercoaster resulting in winners, losers, and frankly, confusion.
We want to take a moment and step back from the chaos. New technology brings a lot of uncertainty. There will be more highs and more lows, and many things will break before they work.
So you might be thinking, is now the right time to invest? Is crypto here to stay? We want to tackle these questions from an institutional frame of mind. Pulling from a robust survey conducted by Institutional Investor Custom Research Lab and sponsored by Coinbase, here’s what we know:
Despite the crypto winter, institutional investors increased their crypto allocations as an investment to learn and build for the future. Sevent-two percent support the view that digital assets are here to stay and 71 percent expect digital asset valuations to increase over the long term.
Investor attitudes towards investing in crypto are evolving
The emphasis has been less on a hedge against inflation and more geared towards yield opportunities, investment in innovative technology, and opportunities to generate alpha. Some future applications of blockchain technology, which ultimately would be the adoption of crypto, include supply chain tracking, lending and insurance (through smart contracts), digital identity verification, voting, securely sharing medical information, and many more.
Regulation is a key focus for institutional investors
We suspect that these survey numbers would be even higher if it was conducted post FTX. Fifty-two percent cite an uncertain regulatory environment as the key concern when considering investing in crypto, security, and regulatory compliance. Trust will be essential for the digital asset to grow and gain broader institutional support.
Although the survey was conducted between 21 September 2022 and 27 October 2022 (before the FTX saga), we believe investor sentiment would still hold for those taking a long-term view on crypto. See the full report here.
Investor outlook remains positive despite red flags
Based on this data, investor outlook seems to be generally positive, provided that the regulatory environment shapes up. Take this with the backdrop that the crypto market is massive and continues to grow. Overall, crypto volumes on exchanges stood at $4.51 trillion as of July 2022, pushed up by the derivatives market, which makes up 69 percent of total crypto volumes, up from 66 percent in June 2022 (Source: Reuters).
We are aware of the red flags. Currently, there are poor relationships between regulators and most exchanges. Institutional investors will not trade on decentralized exchanges due to a need for sophisticated support and regulation, demonstrating a clear need. The rules are currently being written and are evolving as we learn from mistakes. The aftermath of FTX has increased the lack of trust towards digital assets and the infrastructure supporting it, creating more urgent demands for government oversight and regulation.
But hopefully, a successful cleanse will happen sooner due to these events. Institutional investors who believe in the long-term value of crypto are looking to trade on regulated venues, allowing them to gain exposure to the crypto market while minimizing their risk. In our view, the demand is there and crypto is here to stay. It will take work, and it will take time, but we are bullish on the technology and its current and potential use cases.
To that end, we are excited to introduce you to our latest investment in One Trading. We said that right. Formerly known as Bitpanda Pro, One Trading is a spin out of the regulated institutional trading platform from our portfolio company, Bitpanda. One Trading will operate as an independent entity with a dedicated team separate from that of Bitpanda. While a carve out investment is atypical for Speedinvest, One Trading is a clear exception to the rule. With our inside knowledge of Bitpanda and the quality of the team at One Trading, we could not pass up this incredible investment opportunity!
Here are the highlights:
Fully regulated exchange with licenses in place
One Trading’s regulation-first approach was a key differentiator from its competitors and gave us an immense amount of confidence to invest. Obtaining a license is not only difficult, but expensive, posing a significant hurdle for other players in the space. In light of events involving bad actors, we expect to see a paradigm shift massively favoring regulated players. As just one example, the fallout of FTX resulted in 25 percent of the derivatives market up for grabs, with investors looking to quickly transfer their assets to a regulated and therefore safer exchange.
One Trading currently holds a (VASP) for crypto trading in Italy, which allows the venue to offer Spot and OTC trading across Europe and the UK. They’re also in the process of obtaining an OTF (Organised Trading Facility) license in the Netherlands, which will make them the only venue in Europe to be able to offer and passport derivative products directly to both retail and institutional customers. Derivatives exchanges pose significant initial set-up costs and once the OTF license is obtained, the company can list tokens as securities (distinguishing between the two is a big problem in the market) and offer it to both retail and institutional investors.
One Trading is the only regulated venue that can issue structured products at scale and we hope they set the regulatory-first tone for the rest of the market.
Robust and easy-to-use product with low fees
One Trading offers a variety of trading options, including spot trading and OTC trading. Perpetual and dated futures, super low latency spot, staking, structured products, and margin trading are all coming soon as well. This allows investors to take advantage of market fluctuations and diversify their investment strategy. The exchange has an extremely user-friendly interface and offers a mobile app for trading on the go. Additionally, the exchange's trading fees are among the lowest in the industry, which makes it an attractive option for both retail and institutional investors.
Strong conviction in a best-in-class team
We could not invest in a company without strong conviction and trust in the people building it. We have known One Trading’s founding team for a long time from their time at our portfolio company, Bitpanda. They bring together what’s rare in the crypto world, but important for a regulation-first approach: an entrepreneurial growth mindset paired with strong experience from world-class financial institutions, like JP Morgan, where Josh Barraclough, the CEO, and other team members led the bank’s digital asset strategy.
From all of the team at Speedinvest, hats off to the One Trading team for the successful spin out and fundraise. We are excited for what’s to come! If you’re an institutional investor and looking to trade on a regulated exchange in Europe, be sure to consider One Trading.