Despite the depressed state of the cryptocurrency markets so far in 2018, Wall Street firms are becoming increasingly interested in the space. According to analyst firm Sanford C. Bernstein & Co., there is huge potential for established financial companies to make names for themselves in the crypto sector, though they may have to move quickly.
In their recent report, “Crypto Trading — the Next Big Thing is Here?”, Sanford C. Bernstein analysts say that crypto-exchanges may double their revenues this year to reach totals as high as $4 billion, despite digital assets remaining far from their record highs. If nothing else this certainly shows that there is money to be made in the sector.
In 2017 the largest cryptocurrency exchanges brought in $1.8 billion in fees, around 8% of the revenue of traditional exchanges, but with a much smaller market. By market sector only global cash equity brought in more money for exchanges.
With so much money out there to be made, there are readymade opportunities for established financial players to enter the industry. According to the report, “as the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms,” for example, asset management, market-making or custodial services.
Wall Street firms have been cautious so far in dealing with cryptocurrencies, concerned about price volatility and the regulatory uncertainty over how these assets should be treated. However, some of finance’s famous names have started to consider how crypto might fit into their business.
In June Goldman Sachs announced that it was “exploring” how it might “evolve its business and adapt to the environment” of digital assets. More recently it was reported that the company was considering offering its clients a custodial option for their cryptocurrency holdings. The arrival of such a well-respected name into the industry would surely add to customer confidence.
The report warns that the more traditional financial firms will have to move soon or else face losing the market entirely. It estimates that Coinbase has around half of the transaction revenue pool and may soon have an “unassailable competitive position” if Wall Street does not move quickly to catch it.
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