Although an ugly bear market has had cryptocurrency in its grip, investors need to stay focused on the big picture.
Bitcoin (BTC), the market bellwether, is down about 59% from its November all-time high.
But we’ve been down this road many times before…
From April to July of last year, Bitcoin fell 54%. From 2018 to 2020, Bitcoin dropped 84%. And from 2013 to 2015, Bitcoin sunk 85%.
Each time, Bitcoin has recovered to make new highs. History says it will again. But that isn’t the only reason I’m optimistic.
I’m talking about Wall Street’s growing commitment to cryptocurrency.
Over the past couple of years, Wall Street firms have dramatically ramped up their efforts to incorporate crypto and crypto-based technologies into their business models.
While many Wall Street executives dismissed crypto five or six years ago, they’ve gradually come to realize it is a disruptive technology they need to adopt – before it displaces them.
And crypto startups represent fresh, hungry competition bent on doing just that.
The Many Ways Wall Street Is Embracing Crypto
“We’re going to have competitors, whether it’s a cryptocurrency competitor or another fintech competitor,” Dimon told Yahoo Finance. “I tell our people, don’t guess, you know they’re there, you know they’re coming, you know they want to eat our lunch. Assume it.”
Many have invested millions in crypto startups, but that’s not all they’re doing. Most major banks have created “digital asset teams” and continue to staff them up.
Here’s a taste of what’s been going on:
- Goldman Sachs Group Inc. started trading over-the-counter Bitcoin options with Galaxy Digital in March. Last year, it launched a crypto trading desk. In April, Goldman offered its first Bitcoin-backed loan. Internally, the bank is working on ways to offer crypto services to its private wealth management customers.
- JPMorgan has more than 200 employees in its digital assets division, making it one of the largest. In February, JPMorgan became the first big bank to open an office in the metaverse – in Decentraland (MANA), to be exact.
- Last month, Fidelity Investments announced it would allow clients to add Bitcoin to their 401(k) retirement savings accounts. In April, Fidelity established a presence in the Decentraland metaverse.
- Visa Inc.‘s head of crypto said in December that the company had formed partnerships with 60 major crypto platforms across the globe. The deals involve card programs that make it easy to convert and spend crypto.
- Not to be outdone, Mastercard Inc. has its own “Crypto Card Program” that includes multiple partners, including such major crypto companies as Paxos, Circle, Gemini, and BitPay. A new type of card created in partnership with Nexo (NEXO) uses the customer’s digital assets as collateral.
- Blackrock Inc. was part of a $400 million funding round for Circle, with which it has a partnership to look into how Circle’s USDC stablecoin could be used in capital markets.
- Last year, the New York Stock Exchange (NYSE) minted its first non-fungible tokens (NFTs), but it appears to have much more ambitious plans. In February, it filed an application with the U.S. Patent and Trademark Office to create an online marketplace for NFTs, metaverse-based products, and other digital assets.
And that’s not all. We’re seeing a huge “brain drain” from both big finance and big tech into crypto startups – an even more telling sign that crypto is here to stay.
The Best and Brightest Are Betting on Crypto
Dozens, if not hundreds of high-level people have left safe, lucrative jobs for the wild, unpredictable world of crypto.
Think about that for a second. People with high-level jobs in major financial and tech firms did not get there by being stupid or foolish. They’re among the smartest, most savvy people you can find.
Why make such a risky move? It’s clear to me they want to “skate to where the puck is going to be” – and that’s crypto and everything related to it.
“There is a giant sucking sound coming from crypto,” Sridhar Ramaswamy, a former Google executive who is now CEO of search engine startup Neeva, told The New York Times. “It feels a bit like the 1990s and the birth of the internet all over again. It’s that early, that chaotic and that much full of opportunity.”
I can’t give you an exact number, because as far as I know, no one is tracking it. But over the past year or so I have personally seen dozens of stories about Wall Street people taking the leap into crypto.
Here’s a sample:
- John Dalby, the former chief financial officer at Bridgewater Associates – the world’s largest hedge fund – left to join New York Digital Investment Group (NYDIG) last year.
- The head of crypto at Meta (Facebook’s parent), David Marcus, left in December to become co-founder and CEO at Lightspark, a company created to explore the capabilities and utility of Bitcoin.
- Three former Citi executives left the bank earlier this year to form a crypto-oriented investment management firm called Motus Capital Management.
- The head of fintech at the Bank of England, Varun Paul, has left to join crypto custody firm Fireblocks.
- The vice-president of Amazon‘s cloud computing division, Sandy Carter, left in December to become vice president of business development and channel chief at a crypto startup called Unstoppable Domains. Before AWS, Carter spent 16 years at IBM.
- The head of ETF technology at Citadel Securities, Brett Harrison, left last year to become president of the FTX.US crypto exchange.
- Visa’s head for regulatory affairs for Europe, Roeland Van der Stappen, jumped to crypto exchange Crypto.com less than a month ago, where he serves as vice president, policy, and engagement, EMEA.
- A long-time managing director at Goldman Sachs, Roger Bartlett, jumped to Coinbase in February, where he is now vice president for global financial operations.
Heavy hitters like this don’t make career moves into a nascent industry that they think is going to blow up and disappear. They’re convinced that crypto is the future of finance – and that shifting to crypto will boost their careers.
If you’ve lost money in the most recent crypto crash, think about the people in that list – people who are literally betting their careers on crypto.
Think about the major investments Wall Street firms are making to expand into crypto and the metaverse. And with that investment in crypto, they now have an incentive to help it succeed.
Wall Street – and an increasing number of financial professionals – aren’t too worried about a temporary downturn in the market. They’re in this for the long haul.
And you should be, too.
Advisory Board Member, American Institute for Crypto Investors
Follow me on Twitter @DavidGZeiler.