TD Ameritrade, a retail brokerage firm, has invested in ErisX, a new cryptocurrency exchange. Increasing the diversity of client investment options by the company was the primary motivating factor for the move. TD Ameritrade observed that most of its clients were interested in Bitcoin. Consequently, the company invested in CBOE Bitcoin Futures to allow its clients to trade the currency. As the volume of Bitcoin trades in the exchange increased, the demand for other cryptocurrencies emerged.
The CEO of the company, J.B. Mackenzie, then sought a suitable exchange that would enable its clients to trade in multiple cryptocurrencies. ErisX fit the bill. The exchange makes it possible for clients to trade in several cryptocurrencies such as Etherium and Litecoin.
The move by the company is not purely reactive to client demand. On the contrary, it has an additional strategic focus. Concerning that, the company views the investment as one of the first steps to accessing the products offered in cryptocurrency markets in the future. Again ErisX emerges as a favorite to this end considering it plans to launch several complimentary products 2019. The plans are already complete and are only awaiting regulatory approval.
The investment demonstrates the potentially lucrative nature of cryptocurrency markets. TD Ameritrade is not the only company to have made this observation. Other companies are also giving this new market much attention. Virtu Financial and Digital Currency Group are some of the most notable investors in this area.
While the investment into cryptocurrency markets by Ameritrade is not surprising, many still question why the company chose ErisX for the venture. This is a valid concern considering that the exchange is not among the largest ones in the world. Moreover, the exchange does not necessarily provide the largest portfolio of cryptocurrencies in the market.
The answer to this question may lie in the product offering by various exchanges around the world. About that, it is emerging that choosing a suitable cryptocurrency exchange investment goes beyond size and portfolio offered in the exchange. Companies are looking at the unique product offering of the investment. Thus, specialization seems highly advantageous.
Taking the case of ErisX, for instance, the company’s target market is mainly institutional investors. Unlike other firms that target both retail and institutional investors, ErisX has opted to focus on its target market only. Thus, most of its product offering is suited for the market niche. For example, the exchange plans to trade futures contracts, which are highly appealing to long-term investors.
Whether this was the reason behind the investment by Ameritrade remains debatable. One thing is, however, clear; that the cryptocurrency market is set to grow in the future. With the likes of Ameritrade and Virtu Financial pumping huge sums of money into the markets, this seems inevitable. What may catch many by surprise is the rate at which the growth is likely to happen. Here, many assume that the growth will be slow and steady. However, based on these recent trends the growth may exceed expectations.
