The big boys are catching up with Bitcoin
Although we saw pain and some risky gambles in the system, bigger and bigger institutions are eager to get onboard with Bitcoin. Continue reading to find out why.
On a misty Monday afternoon, I downloaded the latest episode of Animal Spirits, a podcast about investing, technology, and what’s currently going on in the world.
Usually, they talk about equity markets and how they’re advising their clients. They’re also open to talking about Bitcoin and cryptocurrencies. In this episode, they invited Fidelity’s Research Analyst Jack Neureuter on, to talk about Bitcoin. At first, I was a bit suspicious, as the two co-hosts generally do an excellent job with Bitcoin but often miss the boat on fundamentals.
But because they talked about Bitcoin, and I’m always interested in what researchers say, I tuned in. It turns out this was the right thing to do. The episode was solid, the co-hosts asked good questions, and Jack responded brilliantly. He also cleared many misconceptions people on Wall Street have about Bitcoin. They ended the episode with a bullish outlook and that he and his team at Fidelity are excited about the future.
This got me hooked and interested in one particular topic; How deep down the rabbit hole are some big boys, and what are their end goals with Bitcoin?
Bitcoin’s image problem
See, most companies on Wall Street, at least the ones who understand how technology influences our daily lives, would love to dive down the rabbit hole. I’m not just saying this because they publicly said so but because I know a few people eager to learn more.
The problem is, they can’t. Not because of regulation, OK, that might play some part in it, but because of Bitcoin’s image problem. Whether you ask someone in mainstream media or out on the streets, they might have heard of Bitcoin in a negative context.
Whether that be the volatility or how it’s boiling the oceans, both are big-time problems for such big institutions. Don’t get me wrong, they have used way riskier strategies in the past, but with the current framework, they need to wait it out.
Some institutions took a look at that regulation and found a loophole. If they were to find a Bitcoin trust, they could offer it to their clients and profit from it, which is what they saw with Grayscale and GBTC.
During the bull market, the price of one share skyrocketed, and some of the brightest brains on Wall Street spent almost 50% of the spot price! They could have gotten it cheaper and more secure; Remember, not your keys, not your cheese.
To add injury to the assault, it looks like Grayscale has a lawsuit waiting for them and more trouble ahead. Peter McCormack just published a great interview about the situation. I recommend you go and watch that.
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A small reminder, Bitcoin is for everyone!
I’m bringing up this scenario because I see a recurring theme in Bitcoin.
For years everyone was screaming from the rooftops how we need institutional investors. Companies like Grayscale and Fidelity were some of the earliest adopters and helped with getting more of Wall Street on board.
Once they were in, many people on Twitter were outraged at how these products started with Bitcoin but quickly evolved into other digital currencies. As someone who often works with such institutions, this is nothing new. These firms are here to make money and find ways to satisfy their shareholders.
After a while, different camps started to form. We saw big exchanges and central investment platforms (Gemini, Coinbase, FTX, BlockFi, Celsius, Three Arrows Capital) eager to develop behind-the-scenes relationships.
These were used to profit big time and get some questionable deals done. All of them would later be uncovered in 2022. The other end of the spectrum rightly criticized this behavior, as it mimicked the same principles as Wall Street.
Unfortunately, these institutions did not do the Proof of Work by protecting their investors and holding the actual Bitcoin. They leveraged their capital and took a big gamble, which inevitably didn’t play out.
But that’s the beauty of Bitcoin. It will humble you in so many ways. Where these institutions might have gotten away with in the legacy system, in the Bitcoin landscape, you don’t survive unless you act in good faith. Bitcoin is set out to be an alternative to the financial rails.
This is something most of these companies need to remember. If there is one thing Bitcoin can’t fix, it is human greed.
Fidelity proves how some big boys have done their research
Now, I don’t want to blame all of the big institutions. As I mentioned above, the initial idea for this article came from a great discussion.
Bitcoin is all about Proof of Work. If big institutions with a big budget take their time, you can see great results.
Fidelity is a great example. Although some of their other investments are questionable, they did an excellent job with Bitcoin. You don’t have to look further than their research work and YouTube channel.
If you download one of their monthly reports or watch the video, you’ll realize they spent a lot of time understanding the fundamentals. They’re obviously looking at Bitcoin differently than we as users, but it’s refreshing to see a big institution taking its time.
Of course, they’re part of the Wall Street elite as well, I’m sure they bought some GBTC as well, but they’re doing the most work to offer the best service to their clients.
Nature is healing itself
I chose this article’s title because we’ll see more big boys on Wall Street catching up. Whether that be BlackRock, JP Morgan - although Jamie Dimon doesn’t like to admit it - or MassMutual.
They have allocated a lot of budget to dedicated research arms and will get into Bitcoin soon. Again, the regulation aspect makes it harder for them. If you want to be sneaky, they all waited for the washed-out crypto crowd to disappear. Yes, I’m looking at you, FTX!
That wash-out was necessary. This was not my first bear market and will not be my last. They all had one thing in common; We always saw an emerging youngster and a group of people who would later fail spectacularly. This always marked the start of an even greater bull market with innovation.
This time, we won’t see much more innovation within the system but more from the outside, whether that is a Bitcoin Spot ETF, some clarity about securities law, or the next centralized marketplace.
One thing is certain; Good times are ahead, and we can look forward to them!
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