Wall Street's Embrace of Cryptocurrency: From Derision to Frenzied Investment

Wall Street's Embrace of Cryptocurrency: From Derision to Frenzied InvestmentOnce the laughingstock of Wall Street's top brass, a fringe element in the public investment eye, and a concern for Washington policymakers, by 2024, the narrative surrounding cryptocurrency has undergone a dramatic shift. Digital assets like Bitcoin are now owned and traded by average Americans much like stocks, and are lauded as savvy investments by some of Wall Streets biggest players

Wall Street's Embrace of Cryptocurrency: From Derision to Frenzied Investment

Once the laughingstock of Wall Street's top brass, a fringe element in the public investment eye, and a concern for Washington policymakers, by 2024, the narrative surrounding cryptocurrency has undergone a dramatic shift. Digital assets like Bitcoin are now owned and traded by average Americans much like stocks, and are lauded as savvy investments by some of Wall Streets biggest players. An incoming Washington D.C. administration has also pledged significant legislative reforms to support the industry, with the widespread adoption of cryptocurrency yielding massive returns for early investors. Since the beginning of the year, Bitcoin holders have seen gains of 126%, with the price of Bitcoin surging past $100,000 following Trump's election. Coinmarketcap data shows the total market capitalization of all cryptocurrencies has ballooned by nearly $1.7 trillion. "Everything about the cryptocurrency industry right now is trending in a positive direction," says Ian Katz, managing partner at CapitalAlpha.

Crypto enthusiasts widely believe this upswing is far from over. Matt Hougan, CIO of Bitwise, believes that by this time next year, "we'll be having the same conversationthat Bitcoin has had an unbelievable run." Bitwise predicts Bitcoin will break $200,000 before the end of 2025.

One of Wall Street's biggest beneficiaries of this transformation is BlackRock CEO Larry Fink. Once a proud skeptic of Bitcoin, he's now one of its most prominent advocates. Earlier this year, Fink stated, "I was a proud skeptic, I studied it, I understood it, and then I concluded, 'Okay, you know, my five-year view was wrong.'" His firm, BlackRock, now advises interested investors to allocate up to 2% of their portfolios to Bitcoin. "We think Bitcoin itself is an asset class; it's an alternative to other commodities like gold," Fink told analysts on an October earnings call.

BlackRock, along with ten other asset managers like Fidelity Investments and Franklin Templeton, received approval in January to launch spot Bitcoin exchange-traded funds (ETFs), giving everyday investors access to the world's largest cryptocurrency without needing to directly hold it. BlackRock's spot Bitcoin ETF (IBIT) subsequently became the fastest-growing ETF in history. Research from JPMorgan shows that the eleven launched ETFs had amassed $100 billion in assets under management as of December 18th. "There were people who would have otherwise invested in Bitcoin but didn't participate because there wasn't a traditionally trusted, simple, and efficient way to do it," says Robbie Mitchnick, head of digital assets at BlackRock. "Then the ETFs changed that."

BlackRock's embrace of cryptocurrency (it also launched a smaller spot Ethereum ETF in late July) coincides with an election year that saw a pro-cryptocurrency presidential candidate garner significant industry support. Some of cryptocurrencys biggest playersincluding Coinbase, Ripple, and venture capital firm Andreessen Horowitzcontributed roughly $135 million to Trump's presidential campaign through SuperPACs. Trump also made several commitments to the industry during his campaign. He pledged to fire SEC Chair Gary Gensler, one of the industry's biggest detractors; appoint a cryptocurrency presidential advisory council; and, with the help of Congress, establish a "strategic national Bitcoin reserve."

Whether the president-elect will make the US government a Bitcoin holder, even a buyer, remains a hot topic. However, Gensler has submitted his resignation, and the position, if confirmed, will be filled by Paul Atkins, a prominent cryptocurrency lawyer. For years, Atkins has been outspoken in his support for clearer regulation of cryptocurrency that doesnt stifle innovation or impose unnecessary oversight. Trump also appointed venture capitalist David Sacks as the AI and Cryptocurrency Czar. Through his venture capital firm, Sacks has invested in numerous cryptocurrency and AI companies. Several other members of Trumps cabinet have also disclosed or discussed their exposure to cryptocurrency.

If these administration appointments weren't enough, the industry eagerly anticipates what is likely to be the most pro-cryptocurrency Congress in history. "People are blown away by this because we're a nascent industry, and weve only recently gained traction in Washington," notes Nic Carter, partner and co-founder of crypto venture capital firm Castle Island Ventures. Republicans are expected to push for cryptocurrency-friendly legislation that would provide clear regulations for stablecoins and the broader crypto market, and even provide better ways for large banks to interact with digital assets. Carter has met with Republicans to discuss the cryptocurrency industrys lack of access to US banks. He adds, "We're an industry that's been beaten up for the past four years, and it's natural that we would try to protect our interests."

However, as Goldman Sachs CEO David Solomon pointed out at a recent conference, many regulated US banks still lack access to cryptocurrency. Solomon added, "Everybody is speculating on how the regulatory framework will evolve, but it's still unclear how the regulatory framework is going to evolve." When the first cryptocurrency legislation might pass the House and Senate and land on Trump's desk remains anyones guess. "I would caution everyone that if you think there's going to be a light switch turned on after January 20th next year, and everythings going to be great, and the Bitcoin and digital asset community is going to be flourishing, youre wrong. Thats not how Washington works," notes Anthony Scaramucci, a cryptocurrency investor who served in Trump's first administration.

These unknowns, however, havent fazed some cryptocurrency preachers. MicroStrategy chairman and staunch Bitcoin bull Michael Saylor stated this month: "For the past four years, Ive said every day, buy Bitcoin, dont sell Bitcoin. Im going to continue to buy more Bitcoin. Ill be buying Bitcoin at the highs forever."

Even some of Wall Street's remaining skeptics admit that early Bitcoin investment would have been wise. "Of course I wish I had something I bought that was up 100x in a couple years, right? We all have FOMO [fear of missing out]," Citadel CEO Ken Griffin said at a summit earlier this month.