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Wall Street Warming to Crypto Trading

May 08, 2018

When Bitcoin was created nearly a decade ago, its original purpose was to replace traditional banking and financial structures with a digital alternative that was challenging for a small collection of organizations to control. If Nathaniel Popper’s piece “Bitcoin Sees Wall Street warm to Trading Virtual Currency” is accurate, however, financial managers are beginning to embrace Bitcoin. At the end of last week, Goldman Sachs announced that it was opening a cryptocurrency trading desk, enabling investors to trade futures contracts connected to Bitcoin’s price. Although this development is certainly exciting for pro-cryptocurrency investors, as it adds a level of credibility to Bitcoin, it was the project announced by the Intercontinental Exchange (the parent company of the NYSE) that may really pique the interest of traders.

The Intercontinental Exchange (ICE) has reportedly been attempting to build an online trading system that will allow investors to buy and hold Bitcoins. ICE’s trading platform, by allowing investors to own Bitcoin, goes a step further than simply allowing traders to speculate on Bitcoin price movements. If this plan comes to fruition, it would represent a significant step forward for the legitimacy of not just Bitcoin, but cryptocurrencies in general. 

As the operator of the New York Stock Exchange, the Intercontinental Exchange has significant connections with many of the largest firms in the US, and numerous Fortune 500 financial institutions. The Intercontinental Exchange, by attaching its name to a Bitcoin focused product, may alter the purely speculative perspective that institutional investors maintain regarding cryptocurrencies. The ICE, however, is not the only equity exchange operator considering a shift towards cryptocurrencies. The CEO of Nasdaq, Adena Friedman, recently remarked that the Nasdaq may also create a virtual-currency exchange if regulatory concerns are addressed. 

Online trading broker Robinhood, which provides millions of investors with a no-fee trading platform, announced that it has opened cryptocurrency trading in 4 US states (Colorado, Wisconsin, Mississippi, and New Mexico), with plans to expand further. The ease of accessibility through Robinhood, as well as the no-cost trading will be factors that may increase the attractiveness of entering the crypto market. Although cryptos seem to be building momentum in a broader market, concerns linger over the large-scale adoption of cryptocurrencies.

Projects such as the one initiated by the Intercontinental Exchange (ICE), though promising, are still in the infancy stages, and there is the possibility of they never reach maturity. Cryptocurrencies in general still face significant skepticism. Famed and highly respected investor Warren Buffett, a long-standing critic of cryptocurrencies, recently described Bitcoin as “rat poison squared”. Questions also remain regarding the utility of cryptocurrencies, with a relatively small collection of vendors accepting virtual currencies as payment. While concerns about cryptocurrencies are legitimate, and will certainly need to be addressed, the long-term potential is increasingly difficult to overlook. Institutional financial establishments are coming to the realization that cryptocurrencies represent a changing marketplace, not just a fad, and are beginning to adapt their operations to compensate. 


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