Mainstream financial world sends mixed signals as crypto defies pundits

07 Oct, 2021
Mainstream financial world sends mixed signals as crypto defies pundits

It wasn’t supposed to happen this way. Not in September, when the crypto market lags. And yes, an uptick in October, but not this fast. While the mainstream financial markets took investors for a ride these past few weeks, the digital currency world has not so quietly gained steam, proving that crypto is here to stay.

“Bitcoin climbs back above $50,000 as it starts October on a tear,” is how CNBC summed up the performance of the world’s first cryptocurrency, as it continued to rise, lifting other coins with it.

Cointelegraph put it into even greater perspective. “Bitcoin (BTC) is officially the best-performing asset of 2021, data now confirms,” the news site reports. “As October delivers 15% gains in five days, BTC firmly outperforms macro assets worldwide to seal year-to-date returns of just under 50%.”

While traders and hodlers took to social media to celebrate, views from the traditional financial market remain mixed, starting with Jamie Dimon, the CEO of JPMorgan Chase. In a widely publicized interview with Axios, he said of Bitcoin, "It's got no intrinsic value. And regulators are going to regulate the hell out of it."

Dimon, a constant naysayer on crypto, went further to reinforce the negative narratives that are often voiced about crypto, adding: "If people are using it for tax avoidance and sex trafficking and ransomware, it's going to be regulated, whether you like it or not," he said in the interview.

Interestingly, JP Morgan has been at the forefront of embracing the cryptocurrency world. It is the first bank to offer clients investment opportunities into Bitcoin and crypto funds. It’s JPM Coin – the bank’s in-house stablecoin – uses blockchain technology to facilitate reconciliation of payments around the globe.

So, much for walking the talk. However, as Dimon has been quoted as saying, if that’s what the customers want, that’s what the customers get.

He’s not the only financial influencer that continues to sit on the fence on the rise of crypto. Regulators continue to flip flop in the midst of growing demand and acceptance of digital currencies by the public.

The U.S. Federal Reserve said this week it is ready to launch a review about issuing a Central Bank Digital Currency (CBDC). But not everyone is on board.

“Fed officials are divided on the matter, making it unlikely they will decide any time soon on whether to create a digital dollar,” The Wall Street Journal reports.

“Advocates say a Fed digital dollar could make it faster and cheaper to move money around the financial system, bring into it people who lack bank accounts and provide an efficient way for the government to distribute financial aid,” The Journal states.

However, skeptics in the Reserve are cautious, citing the U.S. Dollar’s role in the international community and concern that a digital dollar could destabilize the currency’s value.

Still, there appears to be heightened sense of urgency to make some decision on a US CBDC, which could be fueled by China’s testing of its digital currency, e-CNY or digital yuan.

“Although a widely-used digital euro, yuan or dollar may be years away, such projects could dramatically disrupt the global financial order,” Reuters reports. “Some in Washington worry the United States will cede dominance of the global financial system if it does not digitize the dollar, currently the global reserve currency.”

Government institutions by nature are known to move cautiously and traditional financial institutions can be the same. However, major banks are taking bigger steps in acknowledging the value and acceptance of cryptocurrencies.

"The banks are capitulating one by one," said Martha Reyes, head of research at digital asset prime brokerage and exchange BEQUANT told Reuters. "For those of us working in the space, the fact that it's too big to ignore is hardly news, and the regulators certainly aren't ignoring it."

Her insight comes on the heels of announcements that US Bancorp has launched crypto custody services for institutional investment managers, as well as Bank of America adding research coverage of crypto assets.

As the mainstream continues to grapple with the rise of cryptocurrency, their mixed signals are sending the message that maybe, just maybe, digital currencies are now too big to ignore, and must be dealt with quickly. October could be a bellweather for crypto. Let’s wait and see.

Joyce Pavia Hanson