Wall Street Embraces Crypto

Wall Street is hopping on board the crypto bandwagon for good reason.  The top minds in the financial center of the world are moving money into crypto in recognition of the merits of the blockchain and the increasing likelihood of an eventual transition to a digital currency.  Add in the fact that the ongoing war in Ukraine has steered more Europeans to cryptocurrency and Wall Street’s pivot to these digital value stores makes even more sense.

Wall Street’s Unexpected Irreverence For Convention

Though most bank executives and other power brokers on Wall Street question the merit of the decentralized finance movement (DeFi), it appears as though they are demonstrating some much-needed irreverence for convention with the gradual shift of funds to cryptocurrency.  Cryptocurrency is unique in that it does not have oversight from the fed.  It is possible that cryptocurrency will eventually serve as a building block to a new currency and economy that powers the world into a digital-centric future in which bitcoin and other crypto take the place of traditional dollars and cents.

All in all, Wall Street increased its investments in cryptocurrency in the previous year by more than a trillion dollars.  In aggregate, Wall Street increased its crypto investments throughout the year by trading $1.4 million of these alternative digital value stores.  Those trades occurred on Coinbase Global.  It was a massive hike over the $120 billion invested in crypto throughout the previous year.  In comparison, retail traders traded $535 of crypto in the year gone by.

Crypto Is Now Mainstream

Wall Street’s endorsement of crypto makes it perfectly clear that digital currencies have spilled directly into the mainstream of the financial ecosystem.  The Street’s pivot to crypto obliterates the stereotype of a basement-dwelling millennial as the average buyer of crypto.  Take a close look at the numbers and you’ll find registered investment advisors, hedge funds and banks are moving to crypto right alongside retail traders.

A recent survey of several hundred institutional investors shows that more than 80% are permitted to have exposure to the cryptocurrency market.  The firms that are the most bullish on crypto are also the largest.  Such funds that have assets under management in excess of half a trillion are most likely to be active in the context of crypto trading.  In fact, more than half of these firms have staff members that are fully dedicated to cryptocurrency analysis and trading.  In other words, institutional investors are reshaping the cryptocurrency market just as much as cryptocurrency is molding Wall Street into its next evolutionary state.  

Is Crypto Becoming Tied To The Nasdaq?

The transition of the Wall Street titans into the crypto space signifies an important shift in which these alternative value stores are viewed and treated similar to other risk assets.  Financial experts insist crypto will likely be traded in unison with tech stocks, meaning a correlation between crypto and the Nasdaq might soon emerge.  

Those who analyze trading activity and quantitative data have found bitcoin had nearly its highest level of correlation to the Nasdaq 100 this past January.  The correlation was only higher at one other point in history.  You would have to go back to the spring of 2020 to find a higher correlation between the tech stocks in the Nasdaq and crypto.  

Stay tuned.  If crypto continues to saturate the mainstream of the investing world, there is a chance it will eventually be added to more ETFs and traditional mutual funds to bolster investor diversification all the more. 

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