Bitcoin rose above $5,500 after bank earnings calls last week. More banks joined Goldman Sachs in stating they were examining the possibility of trading cryptocurrencies. Most notable was JP Morgan, whose CEO had publicly called Bitcoin and a 'fraud' just a few weeks before.
This helps support the view that Bitcoin and cryptocurrencies have the potential to go 'mainstream' despite ongoing setbacks in the ability to create a crypto ETF (I continue to believe that a crypto ETF is a requirement to really expand the adoption rate).
That banks are finally discussing what to do with cryptocurrencies is not surprising to me. As I have stated repeatedly, virtually every person I talk to, buy side or sell side, large or small, public or private, wants to talk about cryptocurrencies. Whether as an investment, what it might be doing to their business, or even, in some cases, what a bubble it is, Bitcoin and Crypto are part of most conversations. It is completely natural for Wall Street to finally embrace that demand - at least tentatively.
Also, in a world of low volatility, the bane of every trading desks' existence, it makes perfect sense for banks to explore trading a volatile and popular product where bid/offer spreads are wide and the ability to trade order flow could be large.
Bitcoin definitely gained a victory, as banks finally admitted to studying how to integrate it into their platforms. That should support prices in the near term as we all get to see what progress is made in terms of ETF launches.
It is important; however, to remember that banks study a lot of things - not all of which get put into action. Even if banks decide to trade cryptocurrencies, they won't create demand by owning large inventories - all they will do is facilitate trading for clients. That facilitation might be enough to move the needle on further price increases, but it is still a long way off, especially since the regulators have yet to weigh in on the subject.
I would take the enthusiasm brought on by the bank announcements with a grain of salt.
Finally, I have to admit that there is an irony that some Bitcoin fans seem to detest 'the establishment' and are often vocal in their disgust that banks would risk money trading bonds, but give a resounding cheer about the possibility of them trading cryptocurrencies - 'capitalism at its finest'.
