Noted investment services provider and research firm Wedbush Securities has announced its first investment in the bitcoin ecosystem, contributing an undisclosed sum to newly launched US bitcoin marketplace Buttercoin.
One of the more vocal research institutions on the subject of bitcoin globally, Wedbush has long been bullish on digital currency while largely refraining from issuing any direct financial support to the ecosystem.
Buttercoin CEO Cedric Dahl framed the funding as proof that institutional players on Wall Street are increasingly interested in supporting the bitcoin ecosystem, and that the bitcoin industry in turn is evolving to fit the needs of established financial players.
Dahl told CoinDesk:
"The partnership is evidence that [...] bitcoin security and custodial practices have evolved over the past two years to a point where institutions feel safe to enter the bitcoin space."
In statements, Sheri Kaiserman, head of equities at Wedbush, spoke to why Buttercoin was the right partner to grow its interest in the space. In addition to the funding, Wedbush revealed it would use Buttercoin's marketplace as the trading vehicle for its clients.
"We are impressed with Buttercoin in many regards, notably that it provides reliable, trustworthy and excellent trade execution, and most importantly that it has a US banking relationship," Kaiserman said.
Opening to the market in October, Buttercoin has not revealed its US banking partnership, citing competitive interests. However, it has positioned this relationship as a key differentiator in a US market that is still seeking regulatory clarity.
Additional investors in Buttercoin include Centralway Ventures, Google Ventures, Reddit co- founder Alexis Ohanian and Y Combinator.
Targeting institutional players
Dahl suggested that the partnership was months in the making, noting that his company reached out to inquire about Wedbush's interest in serving as a market maker on Buttercoin in January.
According to Dahl, though slow to fruition, the partnership could do much to encourage interest from other institutional players it is currently courting.
"Buttercoin is in talks with other institutional players including market makers, prop shops and hedge funds," Dahl said.
Dahl predicted that should current trends continue, bitcoin could be more widely adopted in portfolios as diverse as pension funds or university endowments in the coming years, and that it intends to capture this growth on its platform.
However, he indicated that such a development is contingent on federal and state governments providing the needed regulatory clarity for the industry.
Race to secure liquidity
Dahl positioned the partnership with Wedbush as the start of a long-term partnership between the two firms.
In exchange for conducting activities it's marketplace, Dahl said Wedbush would receive a discount from its standard trading rates. Such an incentive, he indicated, will also be available to other large players that use its market.
"The more volume they process the greater the discount," Dahl added.
Notably, the move coincides with an uptick in announcements from active US-based bitcoin trading services providers.
Palo Alto-based Mirror, which recently rebranded from Vaurum, announced this summer that it will leverage nearly 30,000 BTC purchased at auction by investor Tim Draper to fuel the growth of its platform.
Similarly, New York exchange Coinsetter announced a plan last week to draw more market makers to its order book, offering 10% of the company to interested firms and suggesting liquidity is now a top priority for US-based bitcoin trading startups.
Images Wedbush; Shutterstock