Wall Street is often considered the custodian of financial wisdom and business acumen. In the words of famed investor and Oracle of Omaha, Warren Buffet, “Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.” Hence, it wasn’t much surprising that Wall Street was quick to denounce cryptocurrencies when Bitcoin broke into the limelight a couple of years ago.
Many Wall Street experts were quick to label cryptocurrencies a fraud, a bubble, and a reckless ideology among other things. In fact, the most prominent voices on Wall Street such as JPMorgan James Dimon didn’t miss any opportunity to vilify, criticize, and crucify cryptocurrencies.
Crypto investors are ignoring Wall Street
Interestingly, cryptocurrency investors have largely ignored all the doomsday prophecy from Wall Street. The incredible gains that cryptocurrencies delivered in 2017 exponentially outperformed any kind of bullish performance from traditional Wall Street assets. In the words of Stavros Lambouris, CEO at the global trading platform HYCM Europe; “Bitcoin delivered more than 1500% gains in 2017 and many altcoins delivered comparable gains, Wall Street’s scaremongering can’t discredit cryptocurrency inasmuch as investors are booking tangible gains.”
2018 started out on a somewhat lackluster note for cryptocurrencies and Bitcoin is down 23% in the year-to-date period; yet, investors are optimistic that the future of cryptocurrency is bright. However, the more surprising thing is that Wall Street is starting to get serious about getting involved with cryptocurrencies.
20% of Wall Street firms are planning to launch crypto- trading by 2019
The results of an interesting Thomas Reuters survey has revealed that about 20% of the 400 Wall Street firms are working towards launching a cryptocurrency trading platform within the next 12 months. In fact, the larger number of the 400 Wall Street companies profiled in the report are looking forward to starting their cryptocurrency journey within the next six months.
Neill Penney, co-head of trading at Thomson Reuters, observes in a accompanying note that “Cryptocurrency is still a relatively small part of the trading market, but this survey makes clear this niche segment is starting to enter the mainstream of the financial services industry. This is a major change from a year ago.” Wall Street firms started changing their demeanor to cryptocurrencies earlier this year after CME and CBOE opened up their platforms for the trading of cryptocurrency futures in December 2017.
The realities of the market also corroborate the validity of the Reuters’ survey. Earlier this week, news broke that Goldman Sachs has hired its first crypto employee whose job is to lead the development of the bank’s Bitcoin trading desk. Tearsheet reported that the New York investment bank hired a famed crypto trader, Justin Schmidt to come on board as VP and head of digital asset markets in its securities division.
Wall Street might finally give cryptocurrencies legitimacy
One of the main reasons Wall Street is starting to embrace cryptocurrency is that asset managers are starting to realize that cryptocurrency is here to stay. The inflow of funds into cryptocurrency markets over the last couple of years suggests that the influence of Wall Street as the custodian of financial wisdom is starting to wane. The entry of Wall Street firms into the cryptocurrency market is a smart way to enhance their ability to influence where the money is going.
Secondly, Wall Street firms are coming to the understanding that the volatility in cryptocurrencies can be a massive opportunity when properly harnessed. Wall Street investors are often quick to shout that cryptocurrencies are too volatile; however, the volatility simply makes cryptocurrencies a high-risk high-reward asset that could inject a burst of life into any portfolio.
