Another Wall Street Firm Hops on the Bitcoin Bandwagon
Wall Street trading firm Jane Street Capital, which trades approximately $5.6 trillion USD across its 56,000 products annually, is now eyeing off bitcoin. As reported on Business Insider, the company recently included bitcoin in its list of asset classes. Jane Street Capital is a major global player in quantitative trading, with a focus on technology and a reputation for secrecy.
Jane Street Adds Bitcoin as a New Asset Class
The company started crypto trading just last year, joining other traditional trading firms to have welcomed crypocurrencies to its suite of asset classes such as Virtu Financial, DV Trading, Jump Trading, and Hehmeyer Trading.
Jane Street told Business Insider:
“Jane Street trades over 56,000 products globally across a wide variety of asset classes, including bitcoin”
The firm has declined to reveal how it is trading bitcoin, but is presumably betting on fiat currency settled futures such as those on the Chicago Mercantile Exchange (CME) or Chicago Board Options Exchange (Cboe).
On its move into bitcoin, the company said:
“Jane Street has always taken a considered approach to trading opportunities and will continue to do so. As more cryptocurrency products emerge, we expect to be involved.”
Crypto Arbitrage Opportunities Attracting Wall Street Traders
The volatile nature of cryptocurrencies is luring traditional financial institutions and hedge funds. They also appear to be interested in the arbitrage opportunities that present when prices vary on different exchanges.
As Akuna Capital’s Toby Allen told Business Insider:
“There is sometimes 10 percent exchange arbitrage. As a trader, it is such an amazingly fun space to be in compared to traditional assets because of the spreads and technology gaps.”
The Shift Toward Digital Assets Indicates Wall Street’s Continued Appetite for Risk – for Everyone Else
Wall Street’s growing interest in digital assets is not particularly surprising. Despite the guarded rhetoric from storied financial institutions, traders have always demonstrated an appetite for risk. Collateralized debt obligations (CDOs) that bundled overpriced mortgages serviced by households that could not afford the double-digit interest rates were extremely risky products with a pervasive impact in the first few years of the century.
Ironically, the spirit of cryptocurrencies is, in part, a revolt against the old money network and the dominance of large institutional players. And Wall Street enthusiasm for new assets does not indicate they are sound assets nor necessarily auger well for them.
Let’s hope Wall Street irresponsibility and incompetence does not drag the economy into the worst period of negative growth since the 1930s yet again, as they managed to do using CDOs. Cryptocurrency has already seen its fair share of fraud.
Will more Wall Street trading firms jump on the crypto bandwagon? Is that a good or bad thing? Let us know your views in the comments section.
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