Cryptocurrency and Wall Street: From Trepidation to Embracement?

An overview of Wall Street’s evolved position on cryptocurrency.

When cryptocurrencies first arrived on the scene, few people paid attention to them, except for extremely tech savvy people and maverick investors. Very few guessed that cryptocurrencies would soon form a brand new market worth hundreds of billions of dollars. One man even purchased two pizzas for 10,000 Bitcoins in 2010, not realizing that Bitcoin would soon take the world by storm. At Bitcoin’s all time high price of roughly $20,000, 10,000 Bitcoins were worth roughly $200 million.

However, despite the rise of cryptocurrencies and the fact that many individual investors have gotten behind the cryptocurrency trend, Wall Street and institutional investors were very slow to take to the new asset class. In fact, a number of famous Wall Street investors and leaders criticized cryptocurrencies extensively in a very public fashion. For example, JP Morgan Chase CEO, Jamie Dimon, said of Bitcoin, “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.”

Legendary investor and Berkshire Hathaway vice chairman, Charlie Munger, called investing in Bitcoin “nearly as bad as trading freshly harvested baby brains.” Many other top investors and Wall Street personalities mirrored the sentiment expressed by Dimon and Chase.

Reasons for Wall Street’s Cold Crypto Attitude

There were a number of reasons why Wall Street appeared to take a cold initial stance on cryptos between 2009 and 2017. Most of these reasons revolved around the notions that Bitcoin and other cryptos had no intrinsic value, are just a fad, or will eventually be regulated out of existence. Some famous Wall Street personalities, such as Jordan Belfort, the notorious Wolf of Wall Street, even declared that Bitcoin and other cryptos will eventually be replaced by centralized government versions.

Changing Opinions

Despite the fact that cryptocurrencies were widely accused of being a temporary fad or a bubble that will pop resulting in chaos, they are still going strong, nearly ten years after Satoshi Nakamoto first introduced Bitcoin to the world. So, the idea that cryptocurrencies are just a fleeting fad has been steadily dying. In fact, there are now thousands of cryptocurrencies around the world, and more are created every year. This is largely due to the fact that many companies are now conducting ICOs (initial coin offerings) as opposed to IPOs, due to the fact that it can be a faster and more efficient way to raise funds.

The fears that the SEC or that other major government agencies around the world are going to outlaw cryptocurrencies entirely have also largely died down. In the United States, cryptocurrencies have been officially categorized as property that is subject to capital gains taxes. Many other nations have put them into this category as well. The fact that the fears of cryptos being a fad or being completely outlawed have died down has helped to change sentiment about cryptos on Wall Street.

A Trend Toward Embracement

Even though cryptocurrencies still have their skeptics among the Wall Street and investing elite, such as Warren Buffet, there seems to be an increasing amount of positive sentiment growing on Wall Street toward cryptocurrencies. A number of high profile investors and businessmen including Mark Cuban, Mike Novogratz, Tom Lee, and Chamath Palihapitiya have all spoken publicly in support of cryptocurrencies.

The new CEO of Goldman Sachs, David Solomon, has also expressed an interest cryptocurrency and has stated that Goldman Sachs has “already been clearing some futures around Bitcoin.” There are also rumors that BlackRock, one of the world’s largest investment management corporations is considering getting involved with cryptocurrencies.

Robinhood, an extremely popular exchange has opened free trading for cryptocurrencies, and there are rumors that the NYSE may start offering cryptocurrency trading soon. So, all of the sudden, there is a large amount of positive sentiment from Wall Street and the traditional investing world about cryptocurrencies. It is quite possible that this sentiment could continue and that cryptocurrencies could reach complete or at least near complete acceptance from Wall Street one day.