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If you follow the trajectory of cryptocurrency, you know that there was a point where the mainstream financial world essentially shunned it. In fact, you couldn't go even a few days without a major CEO or corporation denouncing cryptocurrency as a scam, fad, and everything in between.
As the years have gone by, cryptocurrency has carved out a space within the mainstream financial sector and is seeing more institutional support. One of the most recent trends is Wall Street taking a bigger interest in cryptocurrency, with massive implications.
The Trump Push
This shift in Wall Street's attitude towards cryptocurrency coincides with the rise of the industry as a whole. It is no secret that major tokens like Bitcoin are worth tens of thousands of Dollars, even crossing the $100,000 mark last year. Because of this, more people are opening crypto wallets than ever before, and thus, many companies want to get in on the action. This means, however, that they will be competing with the hundreds of pre-existing crypto-related companies, as well as new ones that are also trying to get a piece of the market.
Some of the ways that Wall Street and other businesses are trying to remain competitive is by courting crypto traffic via the many tools that exist within the market, offering financial incentives to new customers, onboarding blockchain processes on their backends, and so on.
It also helps that cryptocurrency acceptance is being pushed very heavily by current US President, Donald Trump. Trump had promised to be a pro-crypto president if re-elected, and from the earliest days in office, he appears to have kept this promise. From the pushing of a strategic Bitcoin reserve to holding the first crypto summit at the White House, American institutions are being incentivized to embrace crypto, and Wall Street is certainly following suit.
The Rise of ETFs
One of the biggest industry winds so far was the approval of spot ETFs for Bitcoin in January 2024 and for Ether a few months after. The ETFs had been heavily pursued within the industry for years, and at one point, it seemed like they would never become a reality. After they were approved, they've been an overwhelming success. Bitcoin ETFs alone have brought in over $100 billion, making them one of the most in-demand investment vehicles in Wall Street.
This has also sparked greater interest in other cryptos receiving ETFs, with the likes of Dogecoin and Solana being rumored to be next in line. It's not just individual investors buying into these ETFs, as cooperations are putting their hats in the ring. As per current stats, institutional ownership of Bitcoin ETFs has tripled in the last quarter alone, coming to almost $40 billion. Clearly, major institutions see the value of putting money into Bitcoin, and as the ETFs continue to mature, this will only increase. Of course, it is speculated that growing interest from individuals is pushing the institutions that they patronize to pay attention to Bitcoin. After all, Wall Street can only ignore Bitcoin for as long as their individual clients do. Once the same clients become interested in the asset class, it officially becomes too big to ignore.
Wall Street Custody
An interesting angle in the evolution of Wall Street's interest in cryptocurrency is its interesting custody. Behind every ETF is a custody solution, and this is essentially the backbone of the funds. A notable trend is that a majority of the Bitcoin ETFs in existence rely on Coinbase for their custody solutions. While coinbase is a legacy company in the crypto space at this point, some experts have pointed out a risk in only relying on one company.
With this in mind, Wall Street companies that had previously denounced crypto are trying to get into the custody space. Citi and State Street, for example, have announced that they will offer bitcoin ETF custody Solutions starting next year. This not only signals growing Wall Street support of the asset class but also offers diversity for the different funds being launched.
Coinbase was listed on a recent ETF filing for Dogecoin, and if more companies do not take up the task, Coinbase could very well end up with a monopoly on custody solutions for ETFs.
State Investment
Another positive sign of crypto acceptance is the growing use of the asset class in state pensions. For an asset class to be included in a state pension, it must have achieved some level of regulatory acceptance and this heavily lends to its credibility. Luckily for Bitcoin, several States, including Michigan and Wisconsin, already have it within their state pensions, and Pennsylvania recently approved an increase of Bitcoin in its fund by up to 10%.
There are several layers to this development and why states are hopping on the Bitcoin battle wagon. First, there is the obvious financial benefit. Regulators and critics alike can debate the merit of Bitcoin, but when it beats out legacy assets like gold in terms of returns, many have no choice but to embrace it. Then, there's the regulatory aspect. Bitcoin and other cryptos are becoming more regulated, whether it's by the SEC or the CFTC.
This means that it is simply safer to invest in crypto, and when you have the likes of BlackRock launching spot Bitcoin ETFs, there are legitimate avenues to buy the token. The fact that the US is currently headed by a notably pro-crypto administration also makes this transition much easier. As time goes on, we can realistically assume that more states will include Bitcoin and other cryptos in their pensions, and this will only lead to the growth of the asset class.
Portfolio Pushing
One aspect of Bitcoin's Wall Street takeover that is not always as clear-cut is the embracing of the asset class by portfolio and hedge fund managers. On the one hand, you see companies like Goldman Sachs, which has bought up almost $2 billion worth of Bitcoin in the last few years. On top of this, there is clearly a growing appetite for Bitcoin among individual customers of various financial firms.
But even with this, some money managers remain skeptical about Bitcoin, with a recent survey showing that almost two-thirds of them would not recommend cryptocurrency to their clients. Some of the common concerns include volatility, use-case skepticism, and doubts about its authenticity. But just like with the ETFs, only time will tell if this number will improve. After all, this does imply that over a third of financial managers would recommend Bitcoin to their clients, which is more than it was a decade ago.
Conclusion
If you need any more evidence that cryptocurrency is fast on the rise, just take a look at the current trajectory of the asset class within Wall Street. Bitcoin especially has become a Wall Street darling, with ETFs, investment from state pensions, and even support from the white house. The next few years will be crucial in determining if Bitcoin can carve out a concrete place within the world of Wall Street and stand alongside the likes of major stocks. As far as many investors are concerned, with enough time and this continuing trajectory, this is very much possible.
