Who will be the first to bring crypto-trading to fiat masses?
When talking about the relations between conventional fiat financial institutions and their viewpoints on cryptocurrency, September 12, 2017, will go down as a shameful day. It was the day that Jamie Dimon, CEO of JP Morgan, tagged Bitcoin a ‘fraud.’
In the eight months following that event, a lot has happened in the cryptocurrency ecosystem, especially regarding banking institutions and Wall Street’s attitude towards Bitcoin and digital currencies. Wall Street-types were polarized as Bitcoin started making some waves in traditional finance. Some ridiculed the concept of decentralized, digital currency, while others paid a close attention and saw potential.
At this point, the financial fiat sector is not just dipping a toe into the cryptocurrency ecosystem; futures trading is now well instituted, and experts in the blockchain technology are being hired from all angle.
There is a particular race on now for main banks to start offering customers the chance to trade digital currencies through their offerings, and they are all on their way to be become top investors in cryptocurrencies.
Goldman Sachs, a financial company that has done a turnaround regarding its attitude towards cryptocurrency, announced on May 3rd that it does not consider Bitcoin as a fraud. This actually brought to mind those famous words said by Jamie Dimon, but more importantly, they also proclaimed their plans to start trading cryptocurrencies.
Commenting on the decision, a Goldman Sachs executive involved in creating the offerings, Rana Yared, said the company had been “overwhelmed” with customer requests.
Goldman’s path to potentially running a cryptocurrency desk has taken a long and winding path. The bank declared in 2014 that Bitcoin was not a currency, and also said clearly that it is too risky for investors and banks.
In 2017, however, Goldman was beginning to consider allowing investors to trade Bitcoin directly, and also one of the blockchain’s top five most vibrant corporate investors. It was in January 2018 when Goldman Sachs also denied rumors that they were set to open a crypto trading desk, but currently, their stance may well be softening.
There are also reports going around about Barclays Bank potentially starting a crypto trading desk, but these also have so far been denied.
Jes Staley, Barclays Group CEO cited regulatory and compliance barriers as their greatest issue, but also said that this growing race is ‘in the lead of technology advancement in finance.”
However, it has been reported that Barclays is weighing institutional demand for digital currencies to decide if the new business model is reasonable. Reports have it that a cryptocurrency-trading operation would have to be approved by CEO of Barclays International, Tim Throsby, and possibly Jes Staley.
Morgan Stanley is another major bank that seems to be in the run to start this cryptocurrency-trading service, most importantly, it appears to be concentrating so much energy into being the first-to-market.
Morgan Stanley has a long-standing rivalry with Goldman Sachs, and in this ‘Arms Race,’ and the first to start a successful crypto trading desk in this ‘Arms Race’ would take a lot of praises.
There are rumors, from an anonymous source, that Morgan Stanley is directing virtually all of its concentration on cryptocurrency trading at the moment. The source from inside Morgan Stanley was cited to have said that the bank is on the brink of opening “crypto focused hedge funds,” and is also doing some work with “pure-play crypto funds.”
Most importantly, the source allegedly said Morgan Stanley is doing everything to get into the crypto space before Goldman Sachs, but ultimately, the two rival banks are not the only ones trying to reach the market first.
Hitting the traditional exchanges
As this frenzy to appease clients and their want of digital currencies heightens, even the owner of the NYSE (New York Stock Exchange) is contemplating letting clients buy and hold Bitcoin.
It is again somewhat mysterious as the source article from the New York Times cites “documents and email” and also four anonymous sources. The move by Intercontinental Exchange (ICE), the owner of NYSE, is a bit different in its approach too as there apparently is no specified path as to how to get Bitcoin to the entire populace.
NASDAQ has also hinted that it would consider becoming a crypto exchange, but only when the markets grow enough for it to be viable.
Adena Friedman, NASDAQ CEO is of the opinion that digital currencies are no doubt here to stay, but that they still have a long way to go before being mature enough; government acceptance and regulations a significant role player in deciding when they will be ready for traditional exchanges like NASDAQ to get on board.
Everyone is getting onboard
The words of the Morgan Stanley source seem to ring true in the banking world. Not only is it the digital assets that are drawing these institutions to try and be first-to-market, but it is also the growth of the blockchain technology and all that can offer the financial sector.
Futures leading the way
These rumors and rumbling are going to turn into a full-scale sprint as time goes on, and it seems as if it actually is the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) who can be ascribed with opening the floodgates with their venture into Bitcoin futures trading.
The announcement of their cryptocurrency futures had a lot to do with the extent of Bitcoin’s highest rally towards $20,000, and even though original uptake in Bitcoin futures was lukewarm, this is foreseen to change as investors more reluctant to risk looking for safer ways to access the market.
The CBOE is now even rooting for Bitcoin ETFs; this comes after the failure of the Winklevoss twins’ bid in 2017. CBOE’s director for product development, Dennis O’Callahan spoke to reporters in March, suggesting that they are not ending their run on at just Bitcoin futures.
This rush the banking sector has taken towards cryptocurrencies has certainly been asserted on the pick-up of interest in Bitcoin as an investable and valuable asset. There’s enough indication out there to infer that many institutional investors are plotting to venture into digital currency.
Datatrek Research, as well as Triad, conducted a survey, in November 2017, gathering answers from 317 institutional traders on whether or not they are interested in investing in Bitcoin and other digital currencies. 36 percent of institutional investors, according to the research, were contemplating buying Bitcoin while 19 percent had already bought.
An untapped market
The alleged ‘arms-race’ to be the first to set up a cryptocurrency exchange desk is totally reasonable, the institutionalized trader market is apparently craving a regulated, safe, and familiar way to be involved in the cryptocurrency ecosystem.
This has been confirmed by surveys, by the investment in Bitcoin futures from CME and CBOE, and by the way in which financial institutions and banks are setting their foot in the door.
There is no uncertainty that whoever does get their product out first will be extremely profitable, and Bitcoin could be in for another massive rally if the response is anything like the build-up to the release of futures.