Love cryptocurrencies or hate the very idea of them, they’re becoming more mainstream by the day.
Cryptocurrencies have surged so much that their total value has reached nearly $2.5 trillion, rivalling the world’s most valuable company, Apple, and have amassed more than 200 million users. At this size, it’s simply too big for the financial establishment to ignore.
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Firms that cater to the world’s wealthiest families are increasingly putting some of their fortunes into crypto. Hedge funds are trading Bitcoin, which has big-name banks starting to offer them services around it. PayPal lets users buy crypto on its app, while Twitter helps people show appreciation for tweets by tipping their creators with Bitcoin.
And in the latest milestone for the industry, an easy-to-trade fund tied to Bitcoin began trading on Tuesday. Investors can buy the exchange-traded fund from ProShares through an old-school brokerage account — without having to learn what a hot or cold wallet is.
It’s all part of a movement across big businesses that see a chance to profit on the fervour around the world of crypto as a new ecosystem further builds up around it, whether they believe in it or not.
“The one thing you can say for certain is that the advent of the era of the Bitcoin ETF opens up the opportunity for Wall Street to make money on Bitcoin in a way that it hadn’t been able to previously,” said Ben Johnson, director of global ETF research at Morningstar. “The winners in all of this are the exchanges and the asset managers and the custodians. Whether investors win or not is a big, bold question mark.”
Bitcoin has come a long way since someone or a group of someones under the name Satoshi Nakamoto wrote a paper in 2008 about how to harness computing power around the world to create a digital currency that can’t be double-spent. The price has more than doubled this year alone to roughly $62,000. It was at only $635 five years ago.
Supporters of cryptocurrencies say they offer an important benefit for any investor: a price that moves independently of the economy, rather than changing with it like so many other investments. More high-minded fans say digital assets are simply the future of finance, allowing transactions to sidestep middlemen, with fees tied to a currency that’s not beholden to any government.
Critics, meanwhile, question whether crypto is just a fad. They say it uses too much energy and point to all the stiff regulatory scrutiny around it. Last month, China declared Bitcoin transactions illegal, for example. The Chair of the United States Securities and Exchange Commission Gary Gensler said in August that the world of crypto doesn’t have enough investor protection and that “it’s more like the Wild West.”
That hasn’t been enough to halt the immense momentum for crypto, as it’s gone from an online curiosity to a bigger part of the cultural and corporate landscape.
In a survey by Citi Private Bank, which manages money for wealthy people at offices around the world, roughly 23 percent said they have made some investments in crypto. Another 25 percent said they are researching it.
The growing acceptance of crypto on Wall Street has created a new crop of darlings that help people buy it. Crypto trading platform Coinbase has a market value of roughly $64bn, for example, putting it on par with such established companies as Colgate-Palmolive, FedEx and Ford Motor.
In the end though, what many on Wall Street see sticking around may not be so much Bitcoin and other cryptocurrencies, but the technology that underlies them.
Called the blockchain, it allows for a public ledger that everyone can check and trust — and many expect it to lead to a wealth of innovations. It’s akin to today’s Netflix, Facebook and other services that sprung out of the infrastructure built during the boom and bust of the dot-com bubble.
JPMorgan Chase, for example, is already using blockchain technology to improve fund transfers between global banks. That’s the same JPMorgan Chase run by CEO Jamie Dimon, who said in an interview with Axios this month that Bitcoin has “got no intrinsic value”.