Goldman and Barclays’ Investment in Elwood a Win for Crypto Adoption

Key Insights:

• Goldman Sachs and Barclays invested in a $70 million funding round for Elwood Technologies.
• The crypto trading platform’s CEO said the investment marks “another validation of the longevity of crypto.”
• The success of the funding round comes despite the recent crypto market turmoil.

Two of the world’s major investment banks just made a big investment in cryptocurrency trading platform Elwood Technologies, The Financial Times reported on Sunday.

US banking giant Goldman Sachs and British powerhouse Barclays participated in a $70 million funding round alongside venture capitalist (VC) Dawn Capital and the VC divisions of Germany’s Commerzbank and US crypto billionaire Mike Novogratz’s Galaxy Digital.

The funding round valued Elwood at around $500 million and marked the first time that Elwood Technologies has sourced outside financing.

Similar to Bloomberg’s terminal

Elwood Technologies was founded by British hedge fund billionaire Alan Howard with the initial aim of managing his personal fortune of digital assets.

Since 2020, Elwood has pivoted from being asset management focused to selling market data, trading infrastructure and asset management software to clients who want to invest in digital assets.

According to The Financial Times, the company’s CEO Strickland said that they provide a tech platform similar to Bloomberg’s widely used terminal and BlackRock’s portfolio management system “Aladdin.”

A bullish sign for crypto

Elwood Technologies CEO James Strickland told the Financial Times that the success of the latest funding round, which comes despite the recent turmoil in crypto markets, is “another validation of the longevity of crypto.”

“We’re getting investment from financial institutions that aren’t expecting to get massive returns in 15 minutes,” he continued, adding that “I think it’s a reassurance message.”

Meanwhile, “as institutional demand for cryptocurrency rises, we have been actively broadening our market presence and capabilities to cater for client demand,” noted Goldman Sachs’ global head of digital assets Mathew McDermott. He said the latest investment in Elwood demonstrated the bank’s “continued commitment” to the digital asset space.

Crypto analysts framed the latest news as another bullish sign for the long-term mainstream adoption of crypto and digital assets.

Cryptocurrency markets have been volatile in recent weeks. Since the start of April, the total market capitalization of cryptocurrencies has fallen from over $2.1 trillion to under $1.3 trillion, a nearly 40% decline, with almost 20% of that coming just this week, at the time of writing.

Earlier in the week, the global crypto market cap at one point even fell below $1.1 trillion for the first time since early February 2021.

Fears about slowing global growth at a time when major global central banks are intent on aggressively lifting interest rates to tame rampant inflation have been cited as the main cause for the recent tumble.

Cryptocurrencies are still primarily viewed as risk-sensitive and speculative assets, hence their susceptibility to risk-off flows, and are also (like precious metals) allergic to rising interest rates, given that this marks an increase in the opportunity cost of holding non-yielding assets like crypto or gold.

Whilst it might be too soon to call the bottom of the recent tumble given the ongoing risk that the Fed might turn even more hawkish, analysts say that longer-term institutional investors are being attracted into the space now that crypto valuations are more favorable.

Goldman and Barclays’ move to invest in Elwood comes amid a broad trend of major financial institutions moving to satiate the growing demand for crypto trading and investment services from their clients.

US asset management giant Fidelity recently announced plans to let 401(k) pension account savers allocate as much as 20% of their portfolio to bitcoin (BTC) and soon expand to other digital assets. All the while, cryptocurrency user metrics continue to trend higher globally.