Two more "heavyweight" players are about to join the cryptocurrency market

Point72, the hedge fund owned by Steve Cohen, is targeting the cryptocurrency sector. The company said in a letter to investors:

“We are exploring opportunities around blockchain technology and its transformative and disruptive capabilities, and we cannot ignore this $2 trillion market.”

According to data from Point72's official website, the fund's assets under management were approximately US$22.1 billion as of April 1. It is reported that Point72's hedge fund and venture capital departments will enter the cryptocurrency market, and the hedge fund will deploy long-short strategies.

The letter follows a report Thursday from cryptocurrency-focused website The Block that said Point72 was poised to make major moves in the space.

With the rise of Bitcoin and optimism about the potential of blockchain technology, fund managers have become increasingly interested in the industry. Point72's competitor Millennium Management has also actively invested in futures and ETFs in the crypto space, including the Grayscale Bitcoin Trust, and plans to continue operating in this area. Endowment funds at Harvard University, Yale University and other universities have also recently begun buying cryptocurrencies on exchanges.

The cryptocurrency market has always been volatile. Bitcoin prices have plummeted since Elon Musk said on Wednesday that Tesla would no longer accept Bitcoin payments. Musk also mentioned that "Bitcoin mining consumes a lot of fossil energy." Meanwhile, Binance Holdings Ltd., the world's largest cryptocurrency exchange, is under investigation by the U.S. Department of Justice and the Internal Revenue Service for possible illegal activities in the market.

Point72 also mentioned in a letter to investors that it will introduce cryptocurrency investment in private wealth management or hedge funds and will conduct a comprehensive review of the "liquidity, risk and return rate" of investment activities. The letter also said:

“It is too early to say what form the company will take in investing in cryptocurrencies. However, we will update you as soon as we have specific plans.”

In addition to Point72, Cowen Inc, a century-old investment bank, is also preparing to enter the market. The investment bank said it will hold cryptocurrencies on behalf of hedge funds and asset management companies. Although many heavyweight institutions on Wall Street are scrambling to make money from clients' interest in this hot asset, they have been reluctant to provide such custody services.

Cowen said Thursday it will provide “institutional-grade” custody services for cryptocurrencies and other digital assets through a partnership with Standard Custody & Trust Co. Cowen will also invest $25 million in Standard’s parent company, PolySign Inc.

Cowen CEO Jeffrey Solomon said in an interview:

“The demand is clear and we will be able to help a lot of institutional clients solve the hassles and start trading digital assets in the not too distant future.”

Cryptocurrency prices have soared this year, luring hedge funds and investment managers into the fast-growing market, and Wall Street banks are rushing to offer services to cater to that demand. Goldman Sachs Group Inc. and Morgan Stanley are among the firms that have announced plans in recent months to help clients buy and sell cryptocurrencies in hopes of winning more business.

But while firms such as Fidelity Investments have been helping clients hold and trade digital assets, many other investment banks have been slow to offer formal custody services.

Part of the reason is concerns from financial industry regulators. Cryptocurrency speculators are often targeted by hackers who steal their digital credentials and their assets. Because of this danger, the U.S. Securities and Exchange Commission said it is weighing how to apply its "custody rule" to the cryptocurrency market - rules that are intended to ensure that any funds and securities held by custodians are not lost or misused.