Report: Wall Street Is Getting Cold Feet On Bitcoin As Crash Continues

Photo: Rick Bowmer, AP

The crypto crash has continued, with about $99) billion wiped off the market since its peak at around $1,137 billion at the start of the year, and leaving a trail of destroyed startups behind it. Bitcoin at one point closed in on the $4,265 price mark, well below both its peak of nearly $28,434 in 2017 and a so-called “floor” of $8,530.

And now major Wall Street firms once rumoured to be preparing entries to the cryptocurrency market—particularly bitcoin futures—appear to have gotten cold feet after a brutal beatdown in crypto prices this year, Bloomberg reported on Sunday.

A bevy of major firms including Goldman Sachs, Morgan Stanley, Citigroup, and Barclays (of London) have all delayed plans to launch bitcoin-related financial services, Bloomberg wrote. Goldman, which “was among the first on Wall Street to clear Bitcoin futures,” was reportedly preparing a trading desk, and offers “derivatives on Bitcoin called non-deliverable forwards” (NDF), has yet to offer crypto trading and has seen little interest in the NDF product:

The bank has yet to offer trading of crypto and has gained little traction for its NDF product, having signing up just 20 clients, according to people familiar with the matter. Justin Schmidt, who was hired to head its digital-asset business, said at an industry conference last month that regulators are limiting what he can do. Still, Goldman plans to add a digital-assets specialist to its prime brokerage division, the person said

Sources told Bloomberg that Morgan Stanley “has been technically prepared to offer swaps tracking Bitcoin futures since at least September,” but yet to trade a single contract. Citigroup has not traded any of its cryptocurrency products “within existing regulatory structures, according to a separate person with knowledge of its business,” the site added, instead only conducting trades by proxy. Barclays lost two executives hired to explore the industry and told Bloomberg it has no plans to launch a crypto trading desk.

Much of the caution has been due to the crash, but other factors have included a lack of guidance from regulators and a bevy of criminal and other investigations in the sector, according to Bloomberg’s report.

As Bloomberg noted, true believers in cryptocurrency remain stalwart that the big financial institutions are still building the infrastructure to get into the market (which could rescue the plummeting prices of major coins like bitcoin). Some industry sites have portrayed the crash as an opportunity to clear out scammers and reduce price volatility. Bloomberg wrote:

Even after the staggering sell-off in digital assets in 2018 — a year after Bitcoin came in touching distance of $28,434 it now trades at around $5,687 — crypto pros see signs institutions are getting ready to jump back in if they need to.

“The more important story is all the infrastructure that’s being built now to enable institutional trading,” according to Ben Sebley, a former Credit Suisse Group AG trader who is now head of brokerage at crypto boutique NKB Group.

Even after the plunge that erased $995 billion from the value of crypto assets, believers are sticking to their script... “It appears as if progress is coming to a halt, yet nothing could be further from the truth,” said Eugene Ng, a former Deutsche Bank AG trader in Singapore who has set up crypto hedge fund Circuit Capital.

Moreover, Nasdaq and the New York Stock Exchange were both eyeing to move forward with futures projects in 2019 as of late November, per CNBC, though two that already existed—run by the Chicago Board Options Exchange and the Chicago Mercantile Exchange—had already reached “their lowest level since they were introduced in December.”

But earlier this month, Bloomberg separately reported the outlook isn’t much better.

“Based on the GTI VERA Band Indicator, Bitcoin is below its lower band indicating more potential losses to come and no current floor,” the site wrote, with more losses likely to come.

[Bloomberg]

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