Despite the collapse of Terra, confidence in cryptocurrencies persisted as two major Wall Street players invested in Elwood Technologies, a provider of crypto trading software.
Barclays and Goldman Sachs invested in Elwood Technologies, formerly Elwood Asset Management, hoping the $500 million company would attract institutional investment.
The recent crypto market turmoil has seen 500 top digital assets drop by more than 50%.
The two Wall Street titans joined venture capital firm Dawn Capital and the venture capital arm of Commerzbank and investment-focused merchant bank Galaxy Digital in investing in a funding round planned before Terra collapsed.
In contrast to Terra’s recent failures, Elwood said funding was focused on infrastructure rather than short-term returns.
Elwood sells software to financial institutions looking to enter the crypto space with large investments. It works with banks, hedge funds, crypto exchanges and fintechs that need access to encrypted transaction data by plugging Elwood’s proprietary software into current trading platforms.
“As institutional demand for cryptocurrencies has risen, we have been aggressively expanding our market presence and capabilities to meet the needs of our clients,” said Matthew McDermott, head of digital assets at Goldman Sachs.
Elwood’s partnership with Bloomberg
Back in February, Elwood partnered with Bloomberg to combine Elwood’s crypto trading platform with Bloomberg’s order management system, allowing Elwood investors to manage their crypto and traditional investments in one place.
Elwood also sold $1 billion worth of blockchain-based fund assets to CoinShares last year. The deal is part of a larger agreement with CoinShares to acquire Elwood’s indexing business for $17 million.
“Unless you have the infrastructure and you’re comfortable with the quality of the underlying architecture, you’re never really going to get the amount that matches the opportunity,” said Elwood CEO James Stickland.
One of the UK’s most prominent cryptocurrency investors, Alan Howard, CEO of hedge fund Brevan Howard, is the founder of Elwood Technologies. He has previously invested in UK digital asset custody firm Copper.co and Asian crypto platform Kikitrade.
Increased inflows into crypto hedge funds
Many traders believe that despite market inefficiencies, the dominance of hedge funds is ripe.
In January, Howard launched a cryptocurrency hedge fund, BH Digital, looking to capitalize on arbitrage between cryptocurrency prices, overseeing more than $250,000.
Galaxy Digital’s Robert Bogucki told the Wall Street Journal in March that “a growing number of funds are looking at cryptocurrencies as a fifth asset,” along with stocks, bonds, currencies and commodities.
“In many ways, trading cryptocurrencies is similar to other trading assets, but with different risks,” said Agustin Lebron of cryptocurrency trading firm Raposa. New York-based hedge fund Hudson Bay Capital Management LP has observed a steady rise in profits from managing cryptocurrencies.
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