Wall Street catching up with bitcoin craze
by: Natasha Doff and Sid Verma
published: October 16, 2017
NEW YORK — Wall Street banks that weren’t already on the bitcoin bandwagon appear to be piling in, or at least eyeing seats, after the cryptocurrency surged to all-time highs this week on the way to $6,000.
Analysts are working to keep up with demand from clients for information. UBS and Citigroup published extensive explainers on blockchain technology, while senior executives at JPMorgan Chase warmed to the cryptocurrency during the bank’s third-quarter earnings call.
The digital currency has risen more than fivefold after trading at less than $1,000 as recently as December, breaking the $5,000 mark with its biggest weekly gain since June. Throughout its rise, the cryptocurrency shrugged off tighter regulations, feuding factions and warnings from the likes of JPMorgan’s Jamie Dimon of fraud and an eventual price collapse.
Below are summaries of some of the crypto-centric research notes that hit client inboxes this week.
Chief financial officer Marianne Lake used a conference call following the bank’s quarterly results to set the record straight about the New York-based bank’s view on digital currencies after Dimon’s comments last month. She said the bank is “open minded” about the potential uses of cryptocurrencies and is testing ways blockchain technology can help the bank interact with clients.
But Dimon couldn’t help himself on Friday. The firm’s chief executive officer said that people who buy bitcoin are “stupid” and governments will crush it one day.
“When I look at bitcoin itself, I struggle a bit,” CEO Michael Corbat said in an interview with Nikkei. “Is it a speculative investment? Probably more so.” Analysts at his firm sketched a guide to the crypto galaxy this week, concluding they are bullish on the underlying blockchain technology.
A government- or central bank-backed digital currency could rewire the financial system, offering opportunities and threats for market participants and policymakers alike, they said. For now, frontier and emerging markets are more natural candidates for the widespread adoption of virtual currencies since domestic exchange-rate regimes are already highly volatile, analysts led by Ronit Ghose wrote.
Analysts at the Swiss bank pulled together a 25-page explainer report on blockchain technology covering everything from its history to where we are in the cycle. They conclude that the sharp rise in cryptocurrency valuations in recent months is a speculative bubble, but estimate that blockchain could add as much as $300 billion to $400 billion of annual economic value globally by 2027.
Sanford C Bernstein & Co
Bincoin’s relentless ascent inspired analysts at the New York-based brokerage to ask the question “what makes money money?” Gautam Chhugani’s and Gaurav Jangale’s report sketches the history of money through history, from fiat currencies to pre-literacy bartering systems.
Their conclusion? “Currency in simple terms is something the society believes in to be acceptable universally.” That implies the digital currency fulfills one basic function of money — as a store of perceived value — but the strategists are keen to downplay its bullish pricing and the currency’s credibility, for now, as a medium of exchange.
The banker to the Queen of England isn’t about to jump on the cryptocurrency bandwagon. Investment manager Monique Wong said in a note to clients published on Friday that there are “too many unknowns to include virtual currencies in our investment strategy”. She concluded that the development of blockchain technology is a far more interesting area to watch than the current “gold rush” on cryptocurrencies.