Goldman Sachs and Citigroup are now looking to enter the crypto space. Morgan Stanley has also indicated that they will do this as they see increased demand from their clients. After these Wall Street giants release tradable products and instruments around Bitcoin, cryptocurrency markets will be validated to some extent.
Altana Digital Currency Fund’s chief information officer, Alistair Milne, says it is vital for markets to be taped by regulated financial institutions. This indicates the growing demand for Bitcoin by institutional investors. “He takes a potshot at the banks via his twitter account.”
“Goldman, Citibank, ICE. Now Morgan Stanley. Because there is no institutional demand, all the Bitcoin services and products are being launched. The hedge fund industry grew from $300 billion to $6 Trillion because of institutional money.
The Goldman Effect
Mid-2018, Goldman Sachs CEO David Solomon declared that the firm would have its very own Bitcoin trading operation. Although the details are still being worked out and the offering has not yet been launched, the announcement seems to have encouraged other financial institutions into exploring the cryptocurrency market. Solomon stated in the announcement:
We are currently clearing futures around Bitcoin and talking about other activities there. But it’s moving very cautiously. We listen to our clients and try to help them as they explore these things. Goldman Sachs needs to evolve and adapt to its environment.
Goldman Sachs has been pro-bitcoin for some time. The former CEO and chairman of Goldman Sachs, Lloyd Blankfein, argued in November that Bitcoin should be dismissed because there is no central governing authority. However, there is a possibility that the consensus currency will gain widespread adoption. He stated:
A five-dollar gold coin had five dollars of gold inside it, so it was worth five dollars. They then issue paper money, which is backed with gold in the Treasury. They eventually issue paper money without the backing of gold. It was not a promise that you would get five dollars worth of gold if you turned it in. It is fiat currency. This piece of paper is worth $55, so it is worth $55. Many people didn’t take the money for long. They now do, without any question. If you move a bit further, you will get bitcoin. This isn’t a fiat currency so it’s not something I trust and I don’t like. If it works, it might be a natural transition from hard money to digital currency.
Blankfein’s open-mindedness has been a crucial role in allowing regulated financial institutions, at least in the US to become more familiar with cryptocurrency and bitcoin.
Investors are inclined to invest
Goldman Sachs and Sachs were the first to enter the crypto space. However, investors have a strong inclination. Many financial institutions are pushed to adopt emerging trends. So sooner or later, other institutions will have ventured into the crypto space.
Although Milne made it sound sarcastic, he was actually making a point. The rapid rise in demand from institutions for cryptocurrency assets is evident by the sudden shift of banks towards them. This could be due to the current bear market. However, the low price range for most cryptocurrencies is not entirely bad.