Swiss Crypto Fintech Targets Institutional Market


Tuesday, 24 July 2018 16:12| Written by Peter Hody

 

Zug-based fintech Cryptalgo is targeting institutional investors for its cryptocurrency services. Its strategy however will depend on how the market is regulated, as CEO Francisco Portillejo Hoyos explained to finews.com.

Cryptalgo is taking a big bet on whether there will be standardized global regulations for the burgeoning cryptocurrency market or not. For the newly-founded fintech, this issue will determine its future. Cryptalgo is aiming to become a specialized crypto services provider for institutional clients: brokerage services, algorithmic trading and custody services.

“Cryptalgo wants to provide a connection between the international crypto currency markets and the institutional market”, CEO Francisco Portillejo Hoyos said in an interview with finews.com.

Bridge To Crypto Economy

This poses two challenges: firstly it requires a higher services standard for institutional clients than for private customers. Cryptalgo will itself have to build this standard, particularly regarding safety, to ensure a seamless connection to the developing crypto economic system.

Secondly Cryptalgo will today have to guess at what form such global regulations could look like. This is a bet on the future, which Portillejo Hoyos and his team took with the founding of the crypto fintech last year.

Regulatory Vacuum = Risk

Currently private investors and the miners provide the crypto market liquidity. The high volatility is generated on one side by nervous private investors who entered the market at very high levels. On the other side are the large private investors, so-called “crypto whales”, who tend to follow a “buy and hold” strategy and with large sales which have a big impact on prices.

Institutional investors are sidelined as the lack of regulation poses high risk. Thus liquidity is too thin to make it attractive to the institutional client.

Algo Trading Test Phase

A key strategic pillar of the Zug-based fintech is reflected in the name Cryptalgo: a system called Algotrader, which combs the global crypto exchanges for pricing spreads. Currently test phases are being run with real currencies, but will be ready when the markets are properly developed.

Cryptalgo believes this is only a question of time. “We expect the crypto will mature and develop more dynamically as soon as regulation and compliance are globally coordinated and existing problems are solved”, said Portillejo Hoyos.

Ex-Bankers in Team

This certainly isn’t a pipe dream since Portillejo Hoyos and his team are mostly senior bankers and bring together considerable know-how for the creation of a crypto prime broker.
Hoyos was a senior manager in the global derivatives business at UBS. The head of the board is former Saxo executive Tobias Straessle.

The advisory team comprises financial experts like John Winter, ex-head of Barclays’ corporate banking and Michael Huttman, head of Millennium Global, a hedge fund service provider.

Hedge Funds as Clients

In April, Cryptoalgo entered into a partnership with Elysium, a currency and futures trading platform, with the goal of giving existing Elysium customers access to the crypto markets.
The customer base which Cryptalgo is eyeing, according to Portillejo Hoyos, are hedge funds, asset managers and proprietary traders. He also believes crypto currencies will emerge from their niche status to become an investment class.

“Demand will develop from private banks, asset managers and their clients”, he said. “They are looking for diversification in the alternative investment categories which don’t have the classical correlation to the traditional financial and interest-rate markets or economic growth.”

The main demand will emanate from hedgefunds, which will establish crypto currencies as a new investment class.

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