Private wallets and self-custody are becoming increasingly popular with hedge funds in the wake of the collapse of cryptocurrency exchange FTX which highland the risks of relying on a single venue for trading, according to a report by Financial news
The report cites Anatoly Crachilov, chief executive of Nickel Digital Asset Management, as saying that his firm is seeing lower trading volumes across all trading venue as investors are “derisking” their positions.
The demise of FTX, which filed for bankruptcy on 11 November, has exposed a raft of weaknesses in the current crypto ecosystem, including high levels of leverage on centralised exchanges. Investors are also moving away from the centralised crypto exchanges on rising concerns over further bankruptcies.
James Butterfill, head of research at CoinShares, has said that “trust is becoming a key issue”, with some funds now gating and exchanges preventing withdrawals.
For the hedge fund industry though, FTX’s collapse has opened doors for off-exchange settlements which managers have been pushing for some time, according to Crachilov, who also expects “resistance from exchanges to accept this approach”.
