Institutional Adoption and Data Infrastructure: The Future of Crypto

Well, crypto majors attempting a breakout yesterday following the cooler than expected August PPI report.

But after this morning's CPI report, we're seeing Bitcoin as well as keeping up with recent range about trading.

Now if there was any doubt, digital asset treasuries do remain a hot trade evidenced by IPO's 3,000% spike earlier this week.

And while E is gaining traction among institutional players, Bitcoin treasury still heavily outnumber all debts.

Most stats are North American companies though Asia Pacific organizations make up 25% of the treasuries.

Joining me live at the New York Stock Exchange is Andre Sorian, who is CEO of FICO.

Great to have you here.

Thank you so much for joining me.

Thank you for having me.

Well, when we take a step back and look at everything that's moving the markets, whether we're talking about equities or crypto, we know that data is key.

So in the world of crypto, when it comes to institutional adoption and how that Shaping data and demands.

Tell us what's happening.

So cryptodata is extremely fragmented, right?

And this is due to the nature of crypto markets.

There are hundreds of cryptocurrency exchanges globally.

You have all the decentralized financial protocols, DEXA that enable trading of crypto assets as well.

So it's a much more fragmented market if you want to trade a single asset.

If you want to trade Bitcoin, there's hundreds of venues where you can do that.

So getting access to kind of you know all of the global data in a place. where even if you're just trading on one or two exchanges, you need to see what's going on for just business intelligence and market surveillance.

And when we think back to how equities started trading and when we look at how crypto is traded, you see fragmented markets.

So can you break that down for us?

What does that exactly mean and why do we sometimes see one price for a crypto, whether we're talking out coin or a major on one exchange and something different on another.

Yeah, so the prices are completely driven by offering supply and demand, right?

So if you have on a specific market, on a specific exchange, whether it's a geographical difference where you have an imbalance on the supply and demand, you just create a different price action on that specific exchange, but it's still the same kind of 10 Bitcoin assets.

So this is a big difference to traditional markets where you have a given stock is going to be traded maybe on a few exchanges, but.

Arbitrage opportunities are far less important.

Andre, when we take a look at some of the key headlines in crypto right now, there are stories about deaths, of course, as well as some of the rotation we saw in August from Bitcoin to E, but pay attention to all that data.

What really stands out to you right now?

So we're seeing purity, you know, a lot of inflow into the space.

That's great.

It will create a supply demand imbalance because all of these debts and all of the ETFs, all of that kind of trash by money that is being raised needs to be replicated the issuers of those companies and the debt owners need to actually replicate and buy.

The assets.

So if you look at the amount of demand that is being generated by debt and ETFs and you compare that to the net new supply of, for example, Bitcoin, we're seeing something like an order of magnitude of 34 X, the demand versus the supply.

So this will create a buying pressure and has been seen in the price action of Bitcoin and eat lately, and this is clearly something you can observe on the market.

Yeah, and of course re, I do want to ask you about that because we've been seeing plenty about companies and how they're focusing mostly on Bitcoin but also E and also other crypto as well.

So what's happening not just in the US but also overseas.

So we're seeing, I mean, before that we had, you know, ETF ETP.

I think ETPs was one of the most common ways initially to get exposure to crypto as an asset class while investing in a traditional vehicle.

This is growing.

The European ETPs were far ahead in terms of timing.

Then the US ETFs came in and the volume exploded.

Now it's raising the volumes also in the European ETP space.

And now it's being followed by debts.

I mean debts are being created all over the world, started with the big US companies, but you see them in London picking up, you see them in Asia, it's becoming a global trend and we'll see how many you know assets are being included in those in those debts and how far the tail end of crypto is being promoted with these structures.

Yeah, and when we think of adjectives to describe the crypto space, sometimes volatility might come into play or even risk.

So what is the data actually telling you when it comes to some of the systemic risks in crypto?

Yeah, so I think so volatility has been, I think, at its lowest point for Bitcoin in a long time.

So we're at a space where Bitcoin, which used to be a really risky volatile asset, is now almost considered a safe asset.

To a lot of other even traditional assets for me, the major risk in crypto that has been in the past not always kind of taken into account properly is more liquidity risk.

So volatility, you know, we know, we look at implied volt, we look at there's a strong derivative market now, so companies like Keiko create implied volt surfaces and everything.

You look at historical realize volatility, you have all that data.

Liquidity risk, I think, is an important one.

Right, because you have all these large companies that are now building significant positions of assets and the question is how many, how much time do I need to liquidate if I need to liquidate, right?

So liquidity risk is an important one and then there's security risk, all those debts like the you know the custody solutions that they're going to take in order to safeguard the assets.

I believe all of these these risks are are what we're going to be facing with that and large losing.

And finally Andre, before I let you go, since we're here, I do want to get your take on what you think in terms of infrastructure upgrades given all this institutional involvement and digital assets.

What really needs to happen here?

Yeah, so clearly I'm going to talk about data infrastructure.

That's my gig, but I, you know, it's really important in a blockchain world.

I think we're at this inflection point where financial institutions are.

Just looking at crypto as an investable asset class, but also as a technology that they can use to intermediate their own internal workflows and everything.

So if you believe in kind of all of the onboarding of capital markets on blockchain rails, you need a new type of market data infrastructure.

You need companies that are going to bridge blockchain infrastructure, operational workflows from an execution standpoint, and financial market data.

Wherever it lives, and that I think is really something Tyco has been extremely focused on is building that bridge, bringing and enabling data providers and data owners of the traditional financial system into delivering that data on chain in order to trigger execution of financial applications.

Well, Andre, we will have to leave it there, but thank you so much for joining me today and thank you so much for sharing all of your insights.

Thank you.

Thank you.