The collapse of crypto exchange FTX has led to a greater focus on using regulated custodians, and the custody revenue opportunity could grow to $8 billion by 2033 from less than $300 million today, Bernstein said in a research report on Tuesday.
“Crypto custody is the foundational enabler for institutional adoption,” analysts Gautam Chhugani and Manas Agrawal wrote, adding that “unlike legacy custody, crypto custody is all about securing the private key,” which makes it a more of a technological endeavor.
The Bernstein analysts said post-FTX they expect a jump in “crypto custody penetration” with existing investors and a sharp growth in custody services in the medium term driven by increased institutional participation in digital-asset markets.
The broker said there is a large revenue opportunity for crypto firms and banks to provide Wall Street-like custody, market-making and prime brokerage services to new crypto investors.
Market making is expected to increase as institutional participation grows and with it demand for liquidity in large-cap coins and less popular tokens, the note said. A market maker is a firm that provides liquidity for an asset or security.
Institutional crypto investors will also need prime brokerage services such as over-the-counter trading desks, derivatives, lending and other structured products, and Bernstein estimates that this could grow to a $14 billion revenue opportunity by 2033.
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