The "Law of True Fragrance" overwhelms everything, Wall Street's "desire to refuse yet welcome" embraces Bitcoin
From avoiding to flocking, Wall Street has gradually abandoned its initial stance and has plunged into cryptocurrency trading. After all, compared to the potential huge income, concerns about reputation seem less important
This year, Bitcoin's surge has been astonishing, and the trading frenzy related to Bitcoin has swept Wall Street, with large investment banks that once scoffed at it now making a 180-degree turn in attitude.
Over the weekend, Craig Coben, former head of equity investments at Bank of America, pointed out in a column for the Financial Times that Wall Street investment banks have significantly changed their stance on cryptocurrencies. Large banks that once kept their distance from cryptocurrencies are now getting involved, reflecting a profound shift in the financial industry's attitude towards cryptocurrencies.
Coben cited related transactions this year, noting that as the scale of crypto trading expands, the list of banks participating in underwriting continues to grow:
Barclays and Citigroup have led multiple convertible bond issuances for Bitcoin investment company MicroStrategy this year, Goldman Sachs has raised funds for Bitcoin miner data center operator Applied Digital, and JP Morgan has underwritten a large number of convertible bonds for Bitcoin mining and infrastructure groups Core Scientific, Mara, and Iren...
From avoiding to flocking, Wall Street has gradually abandoned its initial stance, and Coben remarked that the winds have changed:
JP Morgan CEO Jamie Dimon once called Bitcoin a "fraud" and a "Ponzi scheme," and regulatory concerns deepened this indifference, making cryptocurrency trading the business of smaller investment banks.
In January 2024, the U.S. Securities and Exchange Commission (SEC) approved Bitcoin exchange-traded funds (ETFs), marking a watershed moment.
Additionally, the possibility of Trump being re-elected as president suggests that the SEC will adopt a more cryptocurrency-friendly policy, in stark contrast to the current chairman Gary Gensler's skeptical attitude.
More importantly, it's about revenue; compared to the potential huge income, concerns about reputation seem less significant. Coben noted that trading fees in the Bitcoin market are now quite substantial:
According to IFR data, over $13 billion in cryptocurrency-related convertible bonds have been issued in 2024, with most concentrated in the recent quarter, indicating at least $200 million in underwriting fee income. MicroStrategy's $21 billion stock issuance pays underwriting banks a 2% fee, making this potential income a luxury compared to maintaining reputation.
However, when banks decide whether to fully commit to cryptocurrency business, they face a core question: Can safety be ensured through strict legal scrutiny and full disclosure of risk factors in prospectuses? Or is the risk of associating with an industry viewed by many as highly speculative too great?
Coben analyzes that once a few banks break the norm, others will quickly follow suit, as no banker wants to explain to their boss why they failed to meet expectations or slipped down the rankings.
It depends on each bank's risk tolerance and strategic outlook; different types of cryptocurrency-related companies may have different risk profiles. For example, a mature exchange like Coinbase may have a different risk situation compared to Bitcoin miners or investment tools like MicroStrategy
Once a few banks break the norm, other banks will face pressure to follow suit. Collective action is safer; if problems arise, no single bank will become the target. The instinct for competition also plays an important role, as no banker wants to explain to their boss why they failed to meet expectations or slipped down the rankings