Has Wall Street Forgotten about Bitcoin and Blockchain?

As I sit on a plane going cross country, I have been catching up on some reading from articles I have gathered the last couple of weeks as I often do. In addition to spending my time finally trying to update my latest Quarterly Steem Experience Report (out this week), I found an interesting article from Bloomberg that stated that Wall Street has all but given up on the technology and even trading bitcoin themselves. I thought it would be interesting to share some of their comments as I think it is somewhat far off the reality.

As we have experienced ourselves here in the Steem ecosystem, prices have a clear correlation to interest to cryptocurrencies. Many have even drawn a correlation between Google term searches and the prices themselves. While they have seemed to have stabilized, the low prices have seemed to slowdown the efforts of Wall Street firms that had previously been salivating at the opprortunity to get involved in the trading of cryptocurrencies. This is not surprising considering that most Wall Street firms love being involved in volatile markets as it provides them the volumes and trade flow needed to make great profits. They have historically made more profits in volatile markets than those that are stable as seen in Q3 2018 where trading profits were at all time highs for most of the firms.

Despite all of the Wall Street firms annoucing plans to setup trading desks for institutional clients last year, none have officially come through with the plans. Some say that regulation was the main culprit of the delays but other say that it was the custodial constraints they have had. However, most of those custodial issues have been solved with a number of large institutions coming in to fill the space for these needs such as Coinbase, Fidelity and others. It is interesting to see where many of the firms stand so far:

• Goldman Sachs: currently involved in clearing futures contracts as well as investing in its own custodial solution BitGo Holdings Inc. While hiring a lead to head up Digital Assets, they mention regulators limiting their reach in their brokerage division.
• Morgan Stanley: Hired a Head of Digital Assets and is said to be able to offer swaps tracking bitcoin futures but are still testing client demand.
• Citigroup: has designed products to act as a proxy to cryptocurrencies without having to own them but regulators have not given the go ahead.
• Barclays: Aggresively hired leaders to create a trading desk which ultimately did not proceed and immediately shut down as the resources left the company.

However, despite these signals from the main financial institutions, there are clear pathways forward for institutions to become involved. It seems that mostnof the infrastructure to support Cryptocurrency trading has been built already which makes it more available once demand picks up or regulation is clarified. In addition, we all know about the highly pumped projects from Bakkt and Fidelity which are behemoths given their access to millions of potential clients and billions in assets. Another great trend are the large endowment and pension funds that seems to be testing out to waters as many studies have been made to support the fact that due to the uncorrelated nature of their performance, cryptocurrencies could add value to their portfolios with small allocations. Yale has been one of the most prominent to have made that step recently.

”It appears as if progress is coming to a halt, yet nothing could be farther from the truth,” said Eugene Ng, a former Deutsche Bank AG trader in Singapore who has set up crypto hedge fund Circuit Capital. “The bear market is going to allow many of these institutions to build the proper foundations without rushing to build-out infrastructure without adequate testing for fear of missing out on a gold rush.”

While the bear has put the market and investors into hibernation mode, the infrastructure behind the foundation will be available when needed. This will be a fundamental improvement to allow an increase in adoption as long as key aspects of uncertainty are clarified. This includes custody services and security as well as the interfaces to help clients treat crypto assets similar to regular traditional assets currently traded. It may take time but the legwork seems to have been put in for a great future!

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