The next two years will be critical for institutions entering crypto, according to David Mercer, CEO of LMAX, and the much-awaited wave of interest will be driven by the customer. On this week's episode of The Scoop, Mercer told The Block LMAX Digital has already seen a significant uptick in inquiries from banks and funds compared to 2019.
Mercer discussed the growing volumes LMAX Digital has seen since its launch two years ago, announcing that the firm has facilitated $85 billion in trades to date. He also touched on how the firm is handling rising volatility and maintaining liquidity, how crypto is responding to the COVID-19 crisis in comparison to traditional markets and why LMAX is looking for more asset managers and fund managers to get involved in crypto.
Listen to this week's episode on Apple, Spotify, Google Play, Stitcher, or wherever you listen to podcasts.
As for Wall Street's adoption of crypto, Mercer said bulge bracket banks don't care about investing or offering products in a relatively small asset class. However, he expects they'll start taking major steps into the market in the next year to two years because of customer demand. Customers want crypto in their portfolio, according to Mercer.
"If you want to keep hold of that customer and you don't want to lose it to a retail crypto broker, you better provide access, and that access is gonna be on institutional exchanges like LMAX Digital," said Mercer.
The next year will be key, since Mercer said he's confident household names enter the market.
"I mean investment bank names enter the market," he said. "They'll provide custody, they'll provide credit to their customer."
At that time, they'll be looking for the platforms with the best liquidity, and according to Mercer that will be LMAX Digital.
For now, he said he sees groups dip their toes into crypto futures, but Mercer argued that in order for an asset class to grow, people need to buy spot. Still, he pointed out that derivative markets are typically bigger than spot markets.
Currently, big players don't want to hold crypto, but that's changing as the credit of the asset class grows. Mercer said factors are moving in the right direction. On some corners of Wall Street big players have already dived in. Recently famed hedge funder Paul Tudor Jones said his fund would allocate to bitcoin futures and a number of firms, including Intercontinental Exchange and Fidelity, offer bitcoin related products.