Caspian’s (CSP) Institutional Investment Platform

Institutional Investment Overview

Common examples of institutional investment enterprises, typically referred to simply as institutional investors, include large market actors such as commercial banks and investment banks, mutual funds, pension funds, hedge funds, and insurance corporations. In contrast to retail investors, institutional investment firms in the U.S. and around the world have a much farther-reaching influence on the businesses they invest in and on the market as a whole. This influence has only increased over time. Consider the ownership stakes institutional investors hold in publicly traded corporate entities.  In 2021, institutional investors owned about 80% of the total equity market capitalization of publicly traded entities.

Investment in cryptocurrencies and the digital asset industry is becoming more commonplace. Big institutional players are entering the crypto market regularly. In most cases, institutional investors are organizations that pool funds together on behalf of other enterprises or high-net-worth individuals (HNWI). The amount of capital such institutions invest dwarfs the amounts that the average retail investor can allocate. As a result, the stakes are raised exponentially. Institutional investors spend vast amounts of money to hire the best professional researchers, traders, and portfolio managers in an effort to hedge risk on their sizable investments and gain an edge in the marketplace.

Because of these high stakes, comprehensive market assessment is vital to such institutions. In the digital asset world specifically, institutional investors place a high priority on conducting thorough risk assessments and implementing comprehensive risk tolerance measures. Cryptocurrencies are the most volatile asset class in the world, and prices can frequently fluctuate by 20-30% (or more) in just a few hours. This potential for such extreme volatility means that specialized order management and exchange integration can be critical for success.

Additionally, asset allocation can be an important consideration — especially when investing large amounts of capital. In other words, institutional investors’ crypto portfolios typically consist of a diversified set of cryptocurrencies and crypto products. These can be defined by overall market capitalization (large caps, medium caps, and micro caps) as well as, potentially, a host of other differentiating characteristics such as utility, management, interoperability, and each cryptocurrency’s market capitalization. What’s more, portfolios will also be segmented into different crypto products such as crypto futures, options, and swaps. Institutional trading and investing in the crypto market predominantly focuses on large and medium cap cryptocurrencies.

When executing a trade to make a short-term profit or simply buying into or selling out of a position for the long term, several challenges related to slippage — such as unfavorable bid-ask spreads, poor trading volume, and low liquidity — are mitigated through Caspian’s Order and Execution Management System (OEMS). In addition, utilizing the system’s algorithmic Smart Order Router (SOR) — which aggregates all exchange volume into a single liquidity pool — enhances the execution performance.

The Caspian Crypto Trading Solution

The institutional digital asset market is susceptible to a number of problems including: 

• Poor compliance

• Lack of reporting

• Unreliable trade execution

• Inefficient security

Caspian’s institutional-grade investment and trading management system focuses on providing a solution to these issues via five different components:

1. Order and Execution Management System (OEMS): Caspian’s OEMS is a software platform, exchange aggregator, and suite of tools for advanced trading and portfolio management, designed specifically for institutional investors.

2. Position Management System (PMS): Caspian’s Position Management System (PMS) allows users to manage their trading positions across multiple exchanges and wallets, monitor real-time and historical profit and loss (P&L) data, and access other advanced metrics.

3. Reporting Mechanisms: The Caspian platform features a reporting engine to create reports and compile other data that helps monitor different aspects of a portfolio’s performance. Reporting mechanisms can be used for long-term and short-term analysis. Specialized reporting tools allow institutional investment firms to analyze P&L data, execution data, position size, entry type, exposure, and more, in various formats such as PDF and Excel.

4. Algorithmic Trading Capabilities: The Caspian trading system leverages computer software to follow a particularly defined set of mathematical instructions (an algorithm) to place multiple trades simultaneously. Algorithmic trading gives markets more liquidity and potential increased profitability for institutional investors.

5. Compliance: Caspian’s automated compliance system is built directly into its servers to concurrently audit thousands of trades taking place instantaneously, with only 0.0005 seconds of latency. This system is built as a unique turnkey solution that aims to avoid negative impacts on trading workflows or slowdowns in any other parts of the system. 

As a rule, institutional investors face a number of unique challenges, and this is especially true in a relatively nascent market such as cryptocurrency. Digital assets raise questions of unreliable trade execution, lack of reporting, minimal compliance mechanisms, and (at times) insufficient security. Caspian’s platform design integrates its OEMS and PMS solutions into a single system that facilitates compliance, reporting, and algorithmic trading capabilities. The project team’s expertise, attention to detail, and insatiable drive for improvement help make Caspian a leader in the blockchain space.