As mainstream investors flock to cryptocurrencies to see both higher returns and to increase diversification, investment banks are taking notice of the evolving markets. Although the overall sentiment in Wall Street is hostile towards investing in cryptocurrencies, one major investment bank is taking notice.
The $1 trillion Boston based money manager, Wellington Management, said that the company has upgraded its system to trade Bitcoin futures, and is looking at utilizing cryptocurrencies to diversify some of their portfolios.
"Some of the firm's investment teams are evaluating the potential inclusion of cryptoassets in client portfolios…portfolio teams would only invest in cryptoassets if explicitly permitted by client guidelines." A recently released report from the money manager explained. They also cited their cautious approach due to the “newness and volatility” of the evolving markets.
This approach to the cryptocurrency markets from Wall Street is uncommon at this point. Bank of America recently forbid its wealth advisors from recommending Bitcoin and crypto-related investments to their clients. JPMorgan Chase’s CEO, Jamie Dimon, dismissed Bitcoin as being “a fraud,” and said that he would fire employees who trade it for being “stupid.”
Although filled with many revolutionary technologies, the cryptocurrency markets are also filled with fraud. This fact has left many banks and other Wall Street entities fearful of investing. According to a Bitcoin.com report, nearly 50% of all Initial Coin Offerings in 2017 failed, with investors losing their entire investments.
Regardless of the inherent risks in emerging markets, Wellington sees the potential and claimed that the infrastructure of the market is “falling into place.”
In their report they wrote, “Funds dedicated to cryptoassets have been created. Futures contracts were launched by the Chicago Mercantile Exchange and Cboe Global Markets in December 2017. And starting in January 2018 Weiss Ratings began to assign ratings to several cryptocurrencies."
Wellington is entering the crypto markets cautiously, but if their ventures prove to be profitable they could be the first of many banks to venture into this new and evolving market.