With Banks Turning to Bitcoin, Is It Finally Time to Long th | Droppers of btc
With Banks Turning to Bitcoin, Is It Finally Time to Long the Bankers?
The banks are coming. After years of derision and suspicion, major banks are gradually warming to Bitcoin (BTC), with many major financial institutions beginning to roll out crypto-related services.
In the past, much of the Bitcoin community was taken to declaring, “Long bitcoin, short the bankers.” But now that the likes of Goldman Sachs, Morgan Stanley, BNY Mellon, State Street, Deutsche Bank and others are entering the crypto space, is it now to long banks as well as BTC?
According to industry players speaking, involving themselves in crypto will be a large net positive for banks with few risks (assuming that they don’t hold crypto themselves). Likewise, while certain commentators suggest that a large bank-based custodial layer could create systemic risk for crypto, others claim that the involvement of banks will largely make crypto more secure and stable.
It seems that barely a fortnight is going by without some major bank or financial institution announcing that it’s dipping its toes in crypto in one way or another.
Back in February, America’s oldest bank BNY Mellon revealed that it was rolling out services for its wealth management clients, who could buy, hold and sell bitcoin through the bank. Likewise, Morgan Stanley announced in mid-March that it would let its weather clients invest in three bitcoin funds.
And at the end of March, it was reported that Goldman Sachs would welcome Q2 2021 by offering its wealth management clients a “full spectrum” of investments in bitcoin and other cryptoassets.
This is quite a turnaround for a bank whose investment strategy group effectively declared in 2018 that bitcoin was dead. And it goes to show just how far the mood among the banking sector has changed in only the past few months.
For many industry figures, this turnaround is a big, big positive for bitcoin and the wider crypto market.
“Banks adoption is obviously the key at this stage, it will bring the number of crypto users from 100m+ to 1bn+ likely,” said Igor Khmel, the CEO and founder of digital asset banking firm Bankex.
According to Campbell Adams, the founder of interbank marketplace Pure Digital Markets, bank involvement is arguably the biggest thing that could happen to bitcoin in terms of boosting wider adoption.
As reported this week, State Street's trading platform Currenex partnered with London-based Puremarkets Ltd (Pure Digital) in order to develop a wholesale, multi-custodial digital currency trading platform.
“The fragmented and mainly retail driven crypto infrastructure is a serious impediment to its development and vital maturation. Digital currency trading needs big balance sheet participants to boost capital efficiency and permit significant investment from real money and pension funds for instance,” he told.
In particular, Adams suggested that the participation of major banks is all-but indispensable if bitcoin and crypto want to shed their respective images as manipulable markets where current price isn’t always reliable.
“Global bank involvement will raise the quality bar and promote the establishment of a meaningful and reliable primary market from which meaningful market price discovery will cascade onto the markets below — in a similar way the traditional currency markets infrastructure operates today; reliably, robustly and successfully even in periods of extreme stress,” he said.
