What Seven Banks Have Said About Bitcoin
updated on:25 Mar 2021
Bitcoin is now the world’s third-largest currency, according to a report by Deutsche Bank. And with the cryptocurrency soaring 750% to reach $60,000 this month—and a market cap in excess of $1 trillion—it’s become too big for the banks to ignore. But there’s little consensus among the big investment banks as to whether the asset class is a long-term value proposition—or even whether it’s a proposition at all.
US Federal Reserve chair Jay Powell has said that crypto assets are more for speculation than for payments; many banks agree, but sometimes their actions speak louder than their words. Here’s how the banks stack up in their views on Bitcoin.
Multinational investment bank Citigroup was one of the first big banks to wade into cryptocurrencies. In 2018, it came up with a way to invest in cryptocurrencies without actually owning them.
Most recently, the bank consolidated its views on the cryptocurrency market in a lengthy report published in March 2021, in which it claimed that Bitcoin is “at the tipping point” for mainstream adoption. The bank did highlight some concerns, most notably over custody, capital efficiency, insurance, and the environmental impact of cryptocurrency mining—the energy-intensive process by which new coins are issued.
But ultimately, its prognosis was positive. Bitcoin “may be optimally positioned to become the preferred currency for global trade,” was its bullish high point.
2.Bank of America
While Citi has taken a broadly positive stance on Bitcoin, the same can’t be said for Bank of America, the second-largest bank in the US. In March 2021, it issued a research note to its clients that slammed the cryptocurrency, arguing that because its supply is controlled by a small number of people—known as whales—Bitcoin isn’t a suitable hedge against rising inflation.
In the report, titled “Bitcoin’s Dirty Little Secrets,” Bank of America analysts argued that Bitcoin “remains exceptionally volatile, making it impractical as a store of wealth or payments mechanism.”
Like Citi, Bank of America also highlighted the cryptocurrency’s environmental impact, noting that its annual energy consumption rivaled that of the Netherlands.
Founded in 1935 and headquartered in New York, Morgan Stanley sent a clear signal in January 2021, when it bought 10% of MicroStrategy—a company whose CEO Michael Saylor is one of the most ardent advocates for Bitcoin.
The bank increased its stake in MicroStrategy by almost 500%—a big vote of confidence for Saylor, whose software company rose to prominence after dropping a quarter of a billion dollars on Bitcoin in August last year.
ank asserted that cryptocurrencies are on the threshold of becoming an investable asset class.
While it’s dipped its toes into blockchain, Germany’s second-largest lender hasn’t deemed Bitcoin worthy of a report, having previously described it as a speculative asset,
But actions speak louder than words—The Street reported in March 2021 that Commerzbank’s venture arm had participated in funding rounds for Curv, an Israeli startup that specializes in cryptocurrency. Curv was subsequently acquired by PayPal, which last year announced that it would integrate cryptocurrencies.
New York-headquartered Goldman Sachs, one of the oldest banking firms, is due to open a trading desk for cryptocurrencies this month—for Bitcoin futures, specifically, according to reports.
But, in fact, the venerable firm first announced plans for a crypto trading desk back in 2018 and then quietly shelved the idea amid the Bitcoin price slump later that year. By 2020, it had completely changed its tune and even denied that Bitcoin was an asset class, warning against hedge funds trading cryptocurrencies, and citing a lack of serious investment rationale.
It appears that Goldman execs began to reconsider its position (again) in the summer of 2020 when the bank advertised for a VP of Digital Assets. Goldman Sachs is also indirectly exposed to Bitcoin through its shareholdings in Tesla (as is JP Morgan Chase), and its plans to offer crypto custody are also reportedly imminent.
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