As Bitcoin goes mainstream, Wall Street wants to make money

NEW YORK >> Do you love cryptocurrencies or hate the very idea of ​​them, they are becoming more mainstream every day.

Cryptocurrencies have soared that their total value has reached nearly $ 2.5 trillion, rivaling the world’s most valuable company, Apple, and amassing more than 200 million users. At this size, it’s just too big for the financial establishment to ignore.

Firms that supply the world’s wealthiest families are increasingly investing some of their assets in crypto. Hedge funds are trading Bitcoin, which is where well-known banks begin to offer them services. PayPal allows users to buy crypto in its app, while Twitter helps people show appreciation for tweets by giving bitcoin to their creators.

And as the latest milestone for the industry, an easy-to-trade fund tied to Bitcoin began today. Investors can buy ProShares’ exchange traded fund through an old-school brokerage account without having to learn what a hot or cold wallet is.

It’s all part of a movement in large corporations that see an opportunity to capitalize on the fervor of the crypto world as a new ecosystem is building up around them, whether they believe in it or not.

“It’s safe to say that the advent of the Bitcoin ETF era is opening up the possibility for Wall Street to make money from Bitcoin in a way that was not possible before,” said Ben Johnson. Director of Global ETF Research at Morningstar. “The winners in all of this are the stock exchanges and asset managers and custodians. Whether investors win or not is a big, bold question mark. “

Bitcoin has come a long way since someone or a group of people by the name of Satoshi Nakamoto wrote a paper in 2008 on how to harness the computing power around the world to create a digital currency that doesn’t spend twice can be. This year alone, the price has more than doubled to around $ 62,000. Five years ago it was only $ 635.

Proponents of cryptocurrencies say they offer an extremely important advantage to every investor: something whose price moves independently of the economy rather than tracking it like so many other investments. More high-minded fans say digital assets are simply the future of finance, as transactions in a currency that is not government-committed can bypass middlemen and fees.

Critics, meanwhile, question whether crypto is just a fad, saying it uses too much energy and pointing out all of the tight regulatory scrutiny that appears on it. For example, China made Bitcoin transactions illegal last month. The chairman of the US Securities and Exchange Commission, Gary Gensler, said in August that the world of cryptocurrencies does not have enough investor protection and is “more like the Wild West”.

That wasn’t enough to hold back the immense momentum for crypto as it has moved from being curious about online to become a larger part of the cultural and corporate landscape.

The US bank announced earlier this month that it had started offering a cryptocurrency custody service to large investment managers. That means it is essentially holding its bitcoin for them and expecting it to provide support for other coins soon.

Other well-known banks have also announced that they will be offering custody services for crypto.

“It doesn’t just happen in the fringes and dark corners of the Internet,” said Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts.

Ahmed doesn’t recommend his clients invest in crypto. Until then, he must be able to “go to my local supermarket and buy things for my family and offer crypto and not be laughed at in the store.”

But others are more willing to try.

In a survey by Citi Private Bank of family offices around the world that manage money for wealthy people, about 23% said they have made some investments in crypto. Another 25% said they are researching it.

The growing adoption of crypto on Wall Street has created a new generation of darlings who are helping people make purchases. The crypto trading platform Coinbase, for example, has a market value of around 64 billion US dollars and is on par with established companies such as Colgate-Palmolive, FedEx and Ford Motor.

At Robinhood Markets, the company that became known for bringing a new generation of investors to the stock market is increasingly becoming a place for crypto trading. This spring marked the first time that new Robinhood customers made their first trade in cryptocurrencies rather than stocks.

In the end, what many on Wall Street think is permanent may not be as much Bitcoin and other cryptocurrencies as the technology that underlies them.

The so-called blockchain enables a public ledger that anyone can review and trust, and many expect it to lead to a plethora of innovations. It’s comparable to today’s Netflix, Facebook, and other services that emerged from the infrastructure built during the boom and bust of the dot-com bubble.

“The 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 in which they postulate that digital assets will not exist until after At the beginning of their growth. “New businesses are likely to emerge and ill-positioned companies to exit, creating significant upside for some and downside for others.”

JPMorgan Chase, for example, is already using blockchain technology to improve the transfer of funds between global banks. This is the same JPMorgan Chase led by CEO Jamie Dimon, who said in an interview with Axios earlier this month that Bitcoin “has no intrinsic value”.