As Bitcoin Goes Wide, Wall Street Seeks To Cash In
NEW YORK (AP) – Love cryptocurrencies or hate their very idea, they are becoming more and more common by the day.
Cryptocurrencies have grown so much that their total value has reached nearly $ 2.5 trillion, rivaling the size of G7 economies like Canada and Italy, with over 200 million users. At that size, it’s just too big for the financial institution to ignore.
Companies that cater to the richest families in the world are increasingly investing part of their fortune in crypto. Hedge funds trade Bitcoin, which has reputable banks starting to offer them services around it. PayPal allows users to buy crypto on its app, while Twitter helps people show appreciation for tweets by tipping their creators with Bitcoin.
And in the latest industry milestone, an easy-to-trade fund linked to Bitcoin started trading on Tuesday. Investors can buy the exchange-traded fund from ProShares through an old-fashioned brokerage account, without having to learn what a hot or cold portfolio is.
It’s all part of a movement in big business seeing a chance to profit from the fervor in the crypto world, as a new ecosystem is built around it whether they believe it or not.
“The only thing you can say for sure is that the advent of the Bitcoin ETF era opens up the possibility for Wall Street to make money on Bitcoin in a way that it does hadn’t been able to do it before, ”said Ben Johnson, director of global ETF research at Morningstar. “The winners in all of this are the exchanges, asset managers and custodians. Whether or not investors win is a big and bold question mark.
Bitcoin has come a long way since someone or a group of people by the name of Satoshi Nakamoto wrote an article in 2008 on how to harness the computing power in the world to create a digital currency that cannot be spent twice. The price has more than doubled this year alone to reach around $ 62,000. It was only $ 635 five years ago.
Supporters of cryptocurrencies say they offer an ultra-important advantage for any investor: something whose price moves independently of the economy, rather than following it like so many other investments do. The most ambitious fans say digital assets are simply the future of finance, allowing transactions to bypass middlemen and fees with a currency that is not beholden to any government.
Critics, meanwhile, question whether crypto is just a fad, say it uses too much power, and point to all the rigorous regulatory scrutiny that goes into it. For example, China declared Bitcoin transactions illegal last month. US Securities and Exchange Commission Chairman Gary Gensler said in August that the crypto world does not have enough investor protection and “it’s more like the Wild West.”
This was not enough to stop the immense surge in crypto, as it has grown from an online curiosity to more of the cultural and corporate landscape.
The U.S. bank said earlier this month that it had started offering a cryptocurrency custodial service for large investment managers. This means that he essentially holds their Bitcoin in a safe place for them, and he expects to offer support for other coins soon.
Other branded banks have also announced plans to offer crypto custody services.
“It’s not just in the fringes and dark corners of the web that this is happening,” said Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts.
Ahmed does not recommend his clients to invest in crypto. Before that he said he will have to be able to “go to my local supermarket and buy things for my family and offer crypto and not be laughed at from the store.”
But others are more willing to try it.
In a Citi Private Bank survey of family offices around the world that manage money for wealthy people, around 23% said they had invested in crypto. Another 25% said they were doing research.
The growing acceptance of crypto on Wall Street has created a new generation of darlings that are helping people buy it. The Coinbase crypto trading platform has a market value of around $ 64 billion, for example, which puts it on par with established companies like Colgate-Palmolive, FedEx, and Ford Motor.
At Robinhood Markets, meanwhile, the company that has become famous for attracting a new generation of investors to the stock market is increasingly becoming a place of crypto trading. This spring was the first time that new Robinhood clients were more likely to make their first transaction in cryptocurrency rather than in stocks.
Ultimately, what many on Wall Street see as sustainable may not be as much Bitcoin and other cryptocurrencies as the technology behind them.
Called blockchain, it enables a public ledger that anyone can verify and trust, and many expect it to lead to a host of innovations. It sounds like Netflix, Facebook, and other services today that grew out of the infrastructure built during the rise and fall of the dot-com bubble.
“Applications based on this new software architecture appear to be growing faster than previous technologies,” wrote Bank of America strategists Alkesh Shah and Andrew Moss, in a recent research report claiming that digital assets are just the beginning. ‘in their first phase of growth. “New companies are likely to emerge and poorly positioned companies will emerge, creating significant upside for some and downside for others.”
JPMorgan Chase, for example, is already using blockchain technology to improve money transfers between global banks. It’s the same JPMorgan Chase led by CEO Jamie Dimon, who said in an interview with Axios this month that bitcoin has “no intrinsic value.”