Confidence in crypto is alive despite the collapse of Terra, as two major Wall Street players invest in Elwood Technologies, a crypto trading software provider.
Barclays and Goldman Sachs have invested in Elwood Technologies, formerly known as Elwood Asset Management, hoping that the $500 million company will be able to attract institutional investment.
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The two Wall Street titans joined venture capital companies Dawn Capital and the venture arms of Germany’s Commerzbank and Galaxy Digital, a merchant bank focusing on investing, in investing money in a funding round planned well before the collapse of Terra.
Comparing to Terra’s recent failure, Elwood said that the funding is focused around infrastructure rather than short-term returns.
Elwood sells software to financial institutions looking to enter into the crypto sector through significant investments. It works with banks, hedge funds, crypto exchanges, and fintech needing access to crypto trading data, by plugging Elwood’s proprietary software into current trading platforms.
“As institutional demand for cryptocurrency rises, we have been actively broadening our market presence and capabilities to cater for client demand,” said Goldman Sachs’ digital asset head Matthew McDermott.
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 to allow Elwood’s investors to manage their crypto and traditional investments in one place.
Last year, Elwood also sold $1 billion in blockchain-based fund assets to CoinShares. The deal was part of a larger agreement with CoinShares to buy Elwood’s indexing business for $17 million.
“Unless the infrastructure is there, and you get comfort around the quality of the underlying architecture, then you’re never really going to get the volume to match the opportunity,” said Elwood CEO James Stickland.
One of the U.K.’s most prominent cryptocurrency investors, Alan Howard, the CEO of hedge fund Brevan Howard, is the founder of Elwood Technologies. He had previously invested in a U.K. digital asset custodian Copper.co, and Kikitrade, an Asian crypto platform.
Increasing flows into crypto hedge funds
Many traders believe that crypto is still ripe for hedge-fund dominance, despite the market’s many inefficiencies.
In January, Howard unveiled a crypto hedge fund, BH Digital, looking to capitalize on arbitrage between cryptocurrency prices, which oversees over $250,000.
“More funds see crypto as a fifth asset class,” together with stocks, bonds, currencies, and commodities, said Robert Bogucki of Galaxy Digital to the Wall Street Journal in March.
“In many ways, trading crypto is analogous to other trading assets, but there are different risks,” said Agustin Lebron of Raposa, a crypto trading company. Hudson Bay Capital Management LP, a hedge fund based in New York, has observed a steady uptick in profits managing crypto.
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