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Markets are still struggling, but global financial behemoths are betting big on cryptocurrency

Imagine the ultimate diamond-hands hodlr in 2022 if you close your eyes. You probably don’t picture a Wall Street trader dressed in a business fleece staring at a bank of monitors and Bloomberg terminals. However, institutional money is doubling down during this turbulent period, as crypto markets have lost more than $1 trillion from their November highs. As the traditional banks are recruiting staff for crypto research, Blackrock and Fidelity, the giants of asset-management, are rapidly increasing crypto-related ETFs. Meanwhile, the complex macroeconomic background continues to unfold, with the Federal Reserve winding down pandemic-era stimulus and the White House about to issue crypto advice, as well as concerns about Russia’s intentions in Ukraine.

  • As per last week’s Federal Reserve meeting, the interest rates are probably going up in March. However, it is interesting to know how many rate hikes might be needed in 2022; in other words, there is bound to be more volatility on the horizon as the answer emerges.
  • Hiring for crypto analysts is underway in investment firms like Credit Suisse, Canaccord Genuity, and Jefferies to boost their research divisions, the most recent indication that cryptocurrency is getting more linked (and correlated) with the broader market. As per a research executive at the Bank of America, the company created its own crypto coverage branch late last year. Since last year, there has been a jump of publicly-traded companies who mentioned crypto during earning calls from 17 to 147.
  • Later this year, Wisdom Tree managing $76 billion, plans to launch WisdomTree Prime, a digital asset wallet. Users can easily buy cryptocurrency as well as tokenized versions of actual assets like gold. There is a high demand for crypto from the customer, and crypto asset management has quadrupled between the end of 2020 and 2021, rising from $79 million to over $406 million under WisdomTree.
  • On Wall Street, one major question remains: when should ETFs be purchased? ETFs (exchange-traded funds) are a popular asset type that tracks the price of a single item (such as gold) or a basket of assets (like the S&P 500). As their name implies, they trade on exchanges and can be purchased and sold like stocks through a typical brokerage account. ETFs that hold Bitcoin futures contracts had a record-breaking debut last year. On the other hand, spot crypto ETFs would hold crypto directly, possibly putting a large amount of money into the crypto economy. Hundreds of companies have applied for spot ETFs, but the Securities and Exchange Commission is yet to approve them.
  • Assets worth more than $20 trillion are collectively managed by BNY Mellon, Black Rock, Fidelity, and Charles Schwab and have announced their intentions to pursue crypto ETFs. Fidelity is considering an alternative strategy as it was unsuccessful in filing for spot BTC ETF approval. It has recently submitted to SEC approval of a pair of new crypto-focused ETFs; one would be invested in companies engaged in crypto-related activities like mining, service support, and blockchain technology, while the other would be purely focused on metaverse companies.
  • Unfortunately, raising the crypto adoption rate is not that easy for institutions. Both BNY Mellon and Charles Schwab have expressed their concerns regarding the obscured rule-making environment regarding crypto. It has limited their options to utilize its potential and hence have not given serious thought to it. In a recent tweet by Hester Peirce, the Securities and Exchange Commissioner condemned her agency for denying BTC spot ETF application while simultaneously allowing BTC futures ETF: the rationale behind [the denials] does not improve with time.

In the latest report, Fidelity has shrugged off the fact that BTC is down more than 40% from its recent high of $69,000 by stating that Bitcoin has the potential to be the primary monetary goods, which is a major endorsement from a firm worth more than $4 trillion. The future downturns from the past dips might occur as some analysts state that the crypto might act as a steadying force due to the vast amount of money being pumped by the institution.