This article, from The New York Times, talks about why institutional investors have not entered the cryptocurrency field. The author believes that the cryptocurrency is not ready, and smart investors will not enter the market for the time being. In the article, the author lists the issues facing cryptocurrencies, including liquidity, compliance, security, and application scenarios.
After the publication of this article, it also caused a heated discussion in the community. The heads of exchanges including Kraken and Coinbase expressed their opinions.
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The following is the full text translation:
Many Bitcoin enthusiasts believe that Paul Chou is one of the major Wall Street institutions that will soon become a heavyweight in the cryptocurrency market.
Chou, from Goldman Sachs, created the cryptocurrency exchange LedgerX, which will meet the needs of institutional investors with comprehensive financial contracts.
Today, after the bitcoin crash last year, Chou needed to face the problem that almost none of the large financial companies took action on their cryptocurrency plans.
Initially we expected large companies to be important players in this market. We judged the mistake.
Goldman Sachs said it will open a Bitcoin trading business to serve customers. According to people familiar with the matter, in the year after the announcement of this news, customers have been less interested in this. The new business has not yet been approved by the regulatory authorities, and they are temporarily unable to purchase and manage Bitcoin for their customers.
The parent company of the New York Stock Exchange (NYSE) was forced to postpone the launch of the cryptocurrency exchange announced last year, and there is still no clear indication of when it will be approved by the regulator. The exchange also declined to comment on this.
The Chicago Board Options Exchange (CBOE) said last month that it would stop offering its high-profile bitcoin trading contract at the end of 2017.
The hesitation of large financial institutions is part of the reason why the cryptocurrency industry has continued to shrink after the collapse last year. Since 2017, the price of bitcoin has fallen from nearly 20,000 US dollars to about 4,000 US dollars, has been sideways for a few months, but in the past two days there have been unexpected changes, the cryptocurrency market is ushered in, bitcoin price Once more than $5,000.
Some cryptocurrency enthusiasts had hoped that the admission of Wall Street institutions would enable them to be recognized by traditional investors. But the status quo – and the decline in interest – suggests that it is still difficult to bring Bitcoin from the edge of the Internet into the mainstream financial world.
Ciaran Murray, a cryptocurrency trader from London, said:
Smart money knows that the cryptocurrency is not ready.
Murray tried to create a digital token-based hedge fund, but he found that when investors delved into the technology, they would be discouraged.
Once they touch the details, they will be scared away.
Murray and other cryptocurrency supporters are convinced that these issues are not a fatal blow to Bitcoin and the technology it introduces. Chou is reorganizing LedgerX and applying to regulators for approval to open transactions to retail investors. Retail investors are more interested in cryptocurrencies.
Large companies have not completely withdrawn. Although customers are not very interested, Goldman Sachs and the New York Stock Exchange parent company Intercontinental Exchange (ICE) are still advancing their cryptocurrency trading business. Fidelity, a large asset management company, has recently started working with a handful of big customers who want to hold cryptocurrencies.
In Silicon Valley, Jack Dorsey, CEO of Twitter and online payment company Square, announced last month that he plans to fund several Bitcoin developers. Whether it's the problem or the potential, Dorsey believes the technology can be compared to the early Internet.
Even in this period, which some people call "encrypted winter," bitcoin prices are four times higher than the 2013 apex.
But some of the more practical goals of Bitcoin and other cryptocurrencies have hardly been realized, and the true and false of digital tokens is still difficult to discern.
Bitwise, a cryptocurrency asset management company, recently said it can be certain that 95% of the trading activity given by global bitcoin transactions is false.
The structure of Bitcoin makes it difficult to control. All bitcoins are recorded in a decentralized ledger, the blockchain, and no single institution can control it. Everyone can enter this ledger, including the evildoer.
Regulators have not yet approved bitcoin-related investment products because they suspect that their prices may be manipulated. However, investors can bet on bitcoin price movements through futures contracts, and there is no need to hold bitcoin. Such products have been approved.
The Chicago Mercantile Exchange (CME) launched a bitcoin futures contract that attracted the attention of the deal. However, the market is small enough to stop its rival Chicago Board Options Exchange from issuing its own bitcoin futures contract.
Many market watchers say that in order for Bitcoin to be more attractive to institutional investors, these investors must be able to buy and hold Bitcoin.
The Intercontinental Exchange initially stated that it hopes to launch its cryptocurrency exchange, Bakkt, last fall, allowing investors to eventually hold Bitcoin. Goldman Sachs also said last year that it wants to help customers buy and hold Bitcoin. The efforts of the two agencies have yet to be recognized as regulators question Bakkt and Goldman Sachs' hosting plans.
Most traditional investments, such as stocks or bonds, have clear ways to secure customer accounts. However, the design of Bitcoin means that if Bitcoin is stolen from the wallet, it will be difficult to get it back.
This is already a big problem for many bitcoin exchanges that have suffered serious theft and loss.
Thomas Chippas, CEO of ErisX, another exchange for institutional investors, said:
There are many new areas that are moving towards compliance, and the work of regulators is satisfying, not just fast.
Even if regulators recognize the security measures of Bitcoin exchanges, the application of Bitcoin and other digital tokens is a problem – in addition to speculative activities.
Many Bitcoin enthusiasts believe that as a value-preserving product, Bitcoin is very practical and is not controlled by any government or institution, just like digital gold. But with the fluctuations in the value of Bitcoin, this argument has been challenged. Other applications of Bitcoin, such as online payments, have not been successful.
I think it will take many years for Bitcoin to prepare for non-speculative use cases. Now, people buy Bitcoin for the purpose of expecting it to rise. I think this situation will not end in the next three to four years.
Is Bitcoin ready yet? Netizens look at this
After the publication of this article, it caused a heated discussion in the community. There are also many comments below. Some netizens said that the focus of the question is not whether Bitcoin is ready, but whether people are prepared to face a whole new world:
This has nothing to do with whether cryptocurrency is ready, but whether people are ready to start doing things rationally, and whether people are ready to live in such a world – the accounting unit will not fall into inflation year after year to whitewash us. Corruption in the system.
Jesse Powell, founder of cryptocurrency exchange Kraken, also noticed this article, saying that it is spreading FUD (worry, uncertainty, doubt):
What is the name of this FUD? Someone put forward a better view: smart money ≠ old money. Smart investors have entered the cryptocurrency field and used it for global payments and hedges, and in these respects, outdated investors have failed.
Coinbase's focus in recent years has been on developing institutional users, and its chief technology officer, Asiff Hirji, commented:
The cryptocurrency is ready. Coinbase offers large-scale, high-quality hosting services that are insured; we have the strongest liquidity and agent enforcement mechanisms. Smart investors have entered the field of cryptocurrency.
But because the New York Times belongs to the mainstream media, most readers don't understand Bitcoin, so they seem to be convinced by this article. Some people say that Bitcoin will be zero. Some people say that Bitcoin will bring environmental disaster. For the community, technological progress is certainly delightful, and science is still a part that cannot be ignored.