As bitcoin lurches, Wall Street plots its way into cryptoland
CRYPTO BUFFS have had a punishing week. On May 13th Tether, which issues a “stablecoin” widely used to facilitate bitcoin trading, said that just 2.9% of its $58bn-worth of coins are backed by cash reserves, feeding doubts about its dollar peg. Elon Musk, Tesla’s boss, tweeted that the electric-car maker would not after all accept payments in bitcoin, and hinted that the firm might sell some of its crypto stash. Then on May 18th China warned financial firms against servicing cryptocurrencies. The price of bitcoin tumbled to $30,000, half its record high in April, before stabilising at around $38,000.
As it cratered, bitcoin dragged most other cryptocurrencies with it. Several big crypto exchanges, including Coinbase, experienced lengthy outages. Investors unable to liquidate positions felt trapped; those willing to “buy the dip” felt cheated. The latest swing might raise doubts about whether crypto markets are liquid or even reliable enough to welcome institutional investors en masse. That is why it is worth looking to Wall Street.
America’s big banks have been venturing into cryptoland. In March Morgan Stanley became the first to offer wealthy customers access to bitcoin funds. This month Goldman Sachs revived the crypto desk it had mothballed in 2017; Citigroup said it may offer crypto services. BNY Mellon and State Street are vying to administer bitcoin exchange-traded funds (ETFs), currently under regulatory review in America. JPMorgan Chase, once adamant that it would steer clear unless cryptocurrencies began to be regulated, has hinted that it might start trading operations if the market expands.
