Wall Street is seriously interested in crypto, as can be seen in the recent moves by big banks to offer Bitcoin-related products. According to a Bloomberg article on crypto, Morgan Stanley, a major Wall Street firm intends to offer bitcoin derivatives that will allow investors to go long and short on Bitcoin (BTC). Other Wall Street firms such as Goldman Sachs and Citigroup are also planning to offer similar products. This seems to have created excitement in the market since it means that the institutional money that investors have been hoping for all along is now coming to the market. But is this really something to smile about for retail investors?
The general perception in crypto is that the entry of institutional money will lead to a surge in demand for bitcoin, and as a consequence, push up the value of all other cryptos. However, in reality, Wall Street will introduce a new level of sophistication in the market, since it will become easier to bet against cryptos. This is easy to decipher in the impact of the futures markets on the market so far. Since the introduction of the BTC futures, Bitcoin has been on a sustained downtrend, partly due to an increase of short sellers in the market. As platforms that make betting against the market more commonplace, the market becomes more efficient, and the massive price jumps that most people are hoping for, could indeed be a thing of the past. Bitcoin could end up becoming just another trading commodity like Gold, Silver among others.
Lay of hope
But the entry of Wall Street and their sophisticated financial products is not all gloom. One positive aspect to it is that it will put an end to pumps and dumps that are characteristic of crypto. The liquidity that Wall Street will unlock will make it almost impossible for a few crypto whales to collude and manipulate prices, due to increased scrutiny and the higher volumes involved. This could serve to draw in more investors into crypto and gradually push up the price, into a long-term bull run.
Secondly, as Wall Street financial products begin to trickle deeper into crypto way beyond bitcoin (BTC) the market will become more efficient. Wall Street at its very core is about price discovery. This means that it will sieve out the crypto market and bring out the best products. Good crypto products will without a doubt be rewarded richly by Wall Street. You can deduce this by the way Wall Street has given value to tech companies like Amazon, which is now valued at over a trillion dollars. Some crypto projects will get a similar boost going into the future.
It is also a good time to learn trading. That’s because as the market becomes more liquid, trading bots and trading algorithms will take over. Simply HODLing coins may not cut it going into the future. It’s a bittersweet situation as big money players get into the market.