Goldman Sachs and Barclays rely on Alan Howard's crypto platform

Goldman Sachs and Barclays have invested in Elwood Technologies, the cryptocurrency trading platform founded by British hedge fund billionaire Alan Howard, in a new bet on mainstream adoption of digital assets.

The two banks invested alongside venture capitalist Dawn Capital and the risk arms of German lender Commerzbank and Galaxy Digital, the crypto finance group run by US billionaire Mike Novogratz. The round, Elwood's first outside fundraising, valued the six-year-old company at about $500 million, according to people familiar with the terms.

Elwood is betting that traditional financial institutions — from hedge funds to banks and family offices — will pour more money into digital assets despite the sharp decline in crypto asset prices. According to CryptoCompare data compiled by the Financial Times, the market value of the top 500 digital assets has fallen by more than half from its highs last year. Bitcoin fell below $30,000 on Tuesday for the first time since July.

The Elwood funding round was agreed before the recent weekly decline. The company was founded as a vehicle to manage Howard's personal crypto assets and provides market data and trading infrastructure to large investors in digital assets.

Chief Executive James Stickland shrugged it off, calling the fundraise “another affirmation of crypto’s longevity.”

"We're getting investments from financial institutions that don't expect to get massive returns in 15 minutes. They're investing in infrastructure," he said. “I think it’s a reassuring message.”

The $70 million funding cements a change in direction for Elwood, which focused on asset management as recently as 2019 and plans to offer portfolios of crypto funds to institutional investors. Elwood is now selling the technology it developed to manage its own crypto investments to other customers, said Stickland, who joined the company in 2020 to lead its push to become a software provider.

“As institutional demand for cryptocurrency increases, we have been actively expanding our market presence and capabilities to meet client demand,” said Mathew McDermott, global head of digital assets at Goldman Sachs. He added that the investment demonstrates the U.S. bank’s “continued commitment” to digital assets.

Elwood offers a technical platform similar to BlackRock's Bloomberg Terminal or Aladdin portfolio management system, Stickland said, that aims to plug into financial institutions' existing trading software to help them manage and trade their crypto portfolios.

In February, the company announced a partnership with Bloomberg to connect its software to the US trading platform's order management system.

“If the infrastructure isn't there and you can't be confident in the quality of the underlying architecture, you're never really going to get the volume that matches the opportunity,” Stickland said.

Elwood will remain majority owned by Howard, who was its primary investor prior to the transaction. Hedge fund co-founder Brevan Howard is one of the most prominent British investors to have ventured into the crypto markets.