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is you don ' t want it to influence the market too much because that has a knock-on effect . Last year we traded over $ 500 billion in crypto assets - this year we ’ re just under $ 200 billion . But for me really what is happening is that the dynamics of the client type is changing . Five years ago when we started we were fully retail , there was no sign of any institutional business . We are now in a position where we are seeing interest from real money asset managers , traditional hedge funds , we ’ re seeing a different client type that actually is not that impacted by the likes of recent events because the reality is they probably wouldn ' t have been able to hold funds at these exchanges in the first place .
Sabrina : In my 20 + years in financial markets I ’ ve never seen an asset class that is so rooted in retail making its way to the institutions , typically it is the other way round with institutions getting involved first , creating the regulatory framework and all the guardrails that come with it . Here we ’ ve had a reverse journey , creating a parallel ecosystem . Initially , the asset class was entirely uncorrelated with traditional assets , but now we ’ ve moved to something above 50 % correlated – at peak over 70 % with big indices – which can only mean one thing : people have positioned it on their risk curve , they understand it as an asset class , they can measure it , they can benchmark it . more crypto native maybe you ' re looking for a less correlated asset class but I do think it ' s the strongest indicator so far that institutions are very much positioned in crypto markets much as they ' re positioned in equity markets .
On the idea of trade volume as indicator of institutional activity , a lot of people compare 2022 volumes to 2021 . It ' s true they ' re down , you can ' t deny it , but what ' s more interesting is comparing 2022 to a year earlier . You see that volumes are still an order of magnitude greater they were in 2020 and that ' s a difference of just two years . It shows that even though we may be in what many people think is a bear market , volumes overall are more than three times higher than what they were across all exchanges back in 2020 .
Taylor : I think that ' s right and we ' ve also seen digital assets trading in lockstep with the dollar some days - that means one thing , it means that the machines are involved . It ' s completely changed the dynamic .
Abeetha : I think it ' s important to define what we actually mean by digital assets . At Goldman Sachs you know we look at crypto sitting within digital assets , but we also look at traditional finance arrangements represented on blockchain and DLT as well , so it ’ s about trading but it ’ s also about trying to put traditional markets onto blockchains , we think there would be huge interest from institutional players , from issuers as well as clients , basically trying to digitise the full end-to-end spectrum from pre-trade to execution to post-trade and put those onto DLT . So for us it ' s been extremely busy period relative to what ' s going on within the crypto asset class itself .
Clara : Correlations certainly hit all-time highs back in April . Bitcoin correlated to the S & P 500 was almost a 0.8 correlation which is a record high . You could interpret that as either a good thing or a bad thing - if you ' re
26 // TheTRADE // Q4 2022