Brokers, funds and your friend Bob

In my previous post I talked about some of the big problems that our cryptoassets trading platform was trying to solve and how we were helping businesses solve their problems in the crypto market as well. Today I’m going to talk about our learnings from cryptocurrency brokers and fund managers.

Like me, you may have noticed the awareness and comfort people have in cryptoasset investing has slowly been rising. In a survey that we recently conducted, we found that 41% of respondents believed that investing in cryptocurrencies would be a more effective way to diversify their assets. The number of institutions entering this industry has been growing at a steady pace.  In spite of this growing optimism, one aspect that hasn’t kept pace is the ease with which a person can buy/sell and own virtual currencies (some might argue otherwise). There is still a lack of trust around uploading KYC documents across multiple exchanges or leaving currencies on hot wallets (all the hacks don’t help). In addition to these trust issues, there are additional time-consuming tasks such as creating ether wallets and understanding MetaMask. Transferring and withdrawing fiat currencies from exchanges has been problematic in the past for a number of people and transferring crypto’s between exchanges is also a cumbersome process to deal with.

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This has restricted the number of ‘potential’ cryptoasset investors who might have otherwise entered the market, attracted by interesting projects but would didn’t want to go through the multiple steps involved to get set up.

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In our research, we came across several such individuals. People wanting to be responsible for taking their own trading decisions, tracking prices, measuring performance and then enjoying their returns, but who have yet to enter the market.

This isn’t a market gap that we’re taking pride in identifying, because we’re certainly not the first people to spot it. It’s out there and everyone is aware of it. So what I thought I could mention instead, is the fact that we signed our first licensed cryptocurrency brokerage firm to use our platform.

The crypto-broker firm identified this gap just as a lot of other people did and moved quickly to close it. Fortunately for them, we had the technology ready to help them solve several of the problems they were already facing.

In addition to having built out several operations features, we also created a far more simplified trading screen for the broker’s customers.

Just to clarify, simple doesn’t mean dumbed-down, nor was it easy to make. Taking the pain points of the end customers into consideration we created an intuitive trading screen designed specifically for that user’s category.

We aggregate prices and display the best available price based on the existing exchange accounts of the brokerage firm and our smart order/execution engine will pick the best one allowing the broker’s customers to focus on their analysis and trading, rather than clicking selfies to be onboarded on every exchange, waiting for the right price and missing opportunities.

That’s one side to the Business features that we have. The other side begins with another interesting statistic we uncovered during our survey: 15% of people actually invest in cryptoassets through crypto-fund managers.

Similar to the traditional asset classes, fund managers in the crypto world can be split down into multiple categories but I see two broad categories. By the way, I’m making this split based on our research which involved surveys, interviews, communication on telegram and of course that good old method of actually going out and meeting people (physical interactions are not so passé after all).

One category consists of ‘the new kids’ on the block: several of them had finance jobs, but few were actual fund managers. The other category consists of people who had experience in managing funds and portfolios.

I’ll start with the category I found to be the most interesting; the new kids on the block whom I like to call the ‘Bitcoin Boomers’. They got into the crypto market at the right time (the good old days). Several of them started trading cryptoassets because of their lack of belief in traditional asset classes and their desire to create a new financial ecosystem.

Looking at their industry knowledge, sudden increase in wealth and spending power, their friends and families started sending them money to invest on their behalf. Eventually, this group was sitting on large pools of cash.

Confident in the longevity of the market upside and their continued performances as investment managers, several of them started their own legitimate businesses.

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They couldn’t scale fast hampered by very manual tools, no way of on-boarding clients, creating funds and rebalancing portfolios smoothly.

Every individual we met was managing their funds using spreadsheets. We assumed this problem would be restricted to a small sub-group, but as it turned out, it was a common occurence across the spectrum.

When we spoke to traditional fund managers looking to make a move into the space, they also faced similar problems i.e. a lack of professional investing tools. They were also in need of a new stack because the old one was of no use for these new assets.

The main issue we found for both the customers of the brokerage firm and fund managers was that they did not want to directly transfer their money to crypto wallets or exchanges. Whilst there is today no or little difference in terms of tech stack between crypto brokers and fund managers, UX is obviously different: a broker’s client wants to take his/her own decision whilst a fund manager’s customer is passive by nature and lets their money grow.

As we can clearly see, two different areas of the finance industry are slowly migrating to the cryptoasset space. Our company comes from a background in traditional capital markets as well. We spent the last two years building white label equity brokerage platforms. But after speaking to crypto-brokers, crypto-fund managers and cryptoasset investors, we realised this is a space not going away any time soon.

We’re not the only ones feeling that way: quite a few software builders have started moving into this space but instead of being worried we’re actually glad.

To us, it’s really a validation of our efforts and our belief in this space; competition makes the world go round (now we need to find the people that keep making the Bitcoin price go down!). Jokes aside, another reason why we welcome competition is because the digital asset economy has only just started to show its full potential and it makes it easier for us to differentiate ourselves.

My personal opinion is that we’re moving towards a direction where there will be a larger scale adoption of tokens. There is still a fair share of problems with the current system and it has several critics (rightly so), but I believe that there is enormous potential. Since I don’t want to give a half a** answer on why I believe in this ecosystem, I’ll save that for another article.

In the meanwhile, stay tuned for further updates on our product and research!

About me

I’m a Product Manager at FinFabrik, get in touch if you have any questions about our research, want to talk about user experience, cryptocurrencies or discuss Solo: A Star Wars Story.