The total value of cryptocurrencies has surpassed Apple's at $2.5 trillion. They have more than 200 million users. It's too large for the financial establishment not to notice.
Firms catering to the wealthiest families in the world are investing more of their assets into crypto. Bitcoin is being traded by hedge funds, and big-name banks are now offering services to it. PayPal allows users to buy crypto through its app. Twitter lets people tip their creators with Bitcoin.
The industry's latest achievement was Tuesday's opening of trading for an easy-to trade fund that is tied to Bitcoin. Investors can purchase the exchange-traded fund directly from ProShares using an old-school brokerage account. They don't need to know what a hot/cold wallet is.
It is all part of a larger movement that includes large businesses who see a way to profit from the excitement around crypto. As a new ecosystem grows around it, it doesn't matter if they believe it or not.
"One thing is certain, the Bitcoin ETF has opened up the possibility for Wall Street to make Bitcoin money in a way it had never been able before," stated Ben Johnson, Morningstar's director of global ETF research. The exchanges, asset managers, and custodians are the winners of all this. It is hard to say whether investors will win.
Bitcoin has come a long ways since Satoshi Nakamoto, or a group of people under his name, wrote in 2008 a paper about how to harness computing power from around the globe to create a digital currency that cannot be double-spent. This year, the price of Bitcoin has nearly doubled to $62,000. It was only $635 five year ago.
According to cryptocurrency supporters, they provide an important benefit for investors: a price that is not tied to the economy but moves with it. Digital assets, according to more affluent supporters, are the future of finance. They allow transactions to bypass middlemen and fees while a currency is not bound to any government.
Critics question whether crypto is a fad or if it consumes too much energy. They also point out the stringent regulatory oversight. China, for instance, declared Bitcoin transactions illegal last month. Gary Gensler (chair of the U.S. Securities and Exchange Commission) stated in August that crypto's world doesn't offer enough protection for investors and is "more like the Wild West."
This hasn't stopped crypto's incredible momentum. It's become more than an online curiosity.
U.S. Bank announced earlier this month that it now offers a cryptocurrency custody service to large investment managers. It basically holds their Bitcoin in safekeeping and expects to provide support for other coins soon.
Other banks with a name brand have also indicated their intention to offer crypto custodial services.
Kashif Ahmed, president and CEO of American Private Wealth, Bedford, Massachusetts, stated, "It's also not just in the fringes of the Web that it happens."
Ahmed does not recommend that his clients invest in cryptocurrency. He said that before then, he will need to be able "go to my nearest supermarket and purchase things for my family and be able offer crypto and be laughed out the store."
Others are more open to it.
A survey conducted by Citi Private Bank among family offices worldwide that manage wealth, found that 23% of respondents said they had made investments in crypto. 25% of respondents said they are currently researching the topic.
There are many new companies that offer crypto trading services to help people buy it. Coinbase, a crypto trading platform, has a market capitalization of approximately $64 billion. This puts it on par to established companies like FedEx, Colgate-Palmolive and Ford Motor.
Robinhood Markets is now a popular place to trade crypto currencies. The company that made a name for bringing new investors to the stock market is also known for its ability to get them into it. In spring 2018, Robinhood customers who were new to the stock market were more likely than ever to trade their first cryptocurrency trades.
Wall Street may end up seeing less Bitcoin and other cryptocurrency as their technology.
It is also known as the blockchain. The blockchain allows everyone to trust and verify each other's ledger and will lead to many new innovations. It is similar to the current Netflix, Facebook and other services which were created during the boom-bust of the dotcom bubble.
Alkesh Shah, Bank of America strategists and Andrew Moss wrote that applications built on the new software architecture are growing faster than previous technologies in a recent research report. This suggests that digital assets are still in their initial inning of growth. "New companies are likely and poorly placed companies will leave, which creates significant upside potential for some and negative consequences for others."
JPMorgan Chase is using blockchain technology to increase fund transfers between global banks. Jamie Dimon, CEO of JPMorgan Chase, said this month in an interview with Axios that bitcoin "has no intrinsic value."
