Trading Bitcoin on Wall Street

Bitcoin logo on a line graph
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The folks on Wall Street are dipping their toes into Bitcoin, and they're looking at creating a big-player Bitcoin stock market. It’s an interesting development for a rebel technology that prides itself on having no central control.

For the decade-plus that Bitcoin has been in existence—it was developed in response to the 2008 financial crisis—it’s been mostly ignored, snubbed, and even shut down by the big players on Wall Street. But there are rumblings that this “ignore it, and it will all go away” attitude could be changing.

Key Takeaways

  • Wall Street players such as Goldman Sachs and Fidelity are showing interest in offering Bitcoin derivatives on traditional exchanges.
  • Cryptocurrency wallets and Bitcoin exchanges remain the mainstays of Bitcoin investing.
  • Bitcoin's move to Wall Street is unlikely to affect initial coin offerings.

Wall Street Interest

Goldman Sachs announced in May 2018 that it was opening a Bitcoin trading desk, but in early August 2018, concurrent with the dramatic decline of Bitcoin prices, it also announced that it waasn't “sold” on the virtual currency.

Those are mixed signals, and it’s hard to say where exactly Goldman stands at this point. However, other major players are showing interest—a preliminary prospectus for an ETF filed with the Securities and Exchange Commission from Fidelity in March of 2021 states that the objective of the ETF is to offer shares that "...follow the Fidelity Bitcoin Index PR."

Whether the ETF from Fidelity will take off remains to be seen. This type of back-and-forth with established players isn’t unusual for new technologies. After all, Goldman Sachs was founded in 1869, and Fidelity in 1946—Bitcoin has only been around for a little more than a decade. It’s normal for the big Wall Street players to be skeptical until the value of an investment is proven.

Even with the back and forth, there are major Wall Street players continuing to sniff around the edges of Bitcoin, so it’s important to understand how that might affect you as an investor. Wall Street's interest has the potential to affect investors, Bitcoin regulations, and ICOs (Initial Coin Offerings).

Bitcoin remains a high-risk investment. It’s very volatile and nearly completely unregulated. Before you invest in anything—and especially things like cryptocurrency—it’s important to understand the risk.

For now, it looks like very little will change with investing in Bitcoin and other cryptocurrencies through the Bitcoin stock exchange or through having a digital wallet.

You’ll still need a cryptocurrency wallet like Bitstamp, Bitfinex, or Coinbase. Then, you’ll need to attach a bank account to that wallet. They all use double authentication, because that helps protect your security.

From there, you can buy or sell your Bitcoin for government currency like American dollars or British pounds—or any other currency you’d like.

Bitcoin can also be bought and sold in brokerage accounts (the Bitcoin stock exchange), and you can use it at a few vendors to pay directly for goods and services.

Another area that could be affected by the interest in Wall Street is regulation.

How Could Wall Street Involvement Affect Bitcoin Regulation?

Bitcoin is a strange beast in some ways. Because of the blockchain technology, there have been no fraudulent transactions in the entire history of Bitcoin. That’s quite remarkable.

Blockchain technology is entirely secure, and it’s one of the most promising new developments in cryptocurrency.

But that security doesn’t mean that cryptocurrencies won’t be facing regulations. Regulators could very well bring securities laws that are already on the books to cryptocurrency. Bitcoin may end up escaping regulations, but Ether and Ripple (the second and third most traded cryptocurrencies) look like prime targets for regulation.

According to Gary Gensler, a former financial regulator during the Obama administration, “. . . there’s a strong case for both of them—but particularly Ripple—that they are noncompliant securities.”

If you decide to invest in the Bitcoin stock market or other cryptocurrencies, this potential for new regulation is something to keep in mind. With regulations comes more scrutiny into how Bitcoin and other cryptocurrencies operate. As new cryptos hit the market, they often use ICOs to do so.

How Will This Affect Initial Coin Offerings (ICOs)?

An ICO is a method used by cryptocurrency startups to bypass the regulated and rigorous capital-raising processes that banks and venture capitalists require. Typically, in an initial coin offering, a percentage of the new cryptocurrency is sold to early investors in exchange for Bitcoin or legal tender.

Currently, the interest in Wall Street in Bitcoin is probably not going to affect ICOs very much. It looks like there will be more of an effect on initial coin offerings when regulators come in to address the growing Bitcoin stock market and other cryptocurrency efforts.

And as crypto gets bigger, regulation is more likely to happen. With cryptocurrency getting more attention all the time, it’s starting to move from a rogue market into a more mature one. That’s going to bring changes, so it’s important to stay up to date and be prepared.