Leonid Sukla
As the pace of financial change impacts the cryptocurrency market, Wall Street’s largest banks have been unaffected, and in some cases have rallied against the downtrend. New York Times Reported on July 5th.
On the other hand, retail investors are facing huge losses due to the decline in crypto prices.
In some context, the crypto market is poised for one of its worst bear markets on record, with Bitcoin (BTC-USD) shedding almost 65% of its all-time high of $68.8K in November just before 4:00K. Change of hands on Thursday at 9:40 p.m. The crypto bearishness was exacerbated by the collapse of algorithmic stablecoin TeraUST (UST-USD) in May after it was depegged from the US dollar. Terra’s transition spread to beleaguered crypto lender Celsius, which has suspended payouts for the past three weeks due to liquidity issues and falling token prices. And the next big player to fail was Three Arrows Capital, the crypto hedge fund that recently went bankrupt due to massive liquidations.
“Recent developments have highlighted the importance of a minimum global regulatory framework to mitigate the risk of crypto assets,” the Basel Committee on Banking Supervision said in a May 31 press release.
Thanks in part to regulatory restrictions, Wall Street banks are not being bothered by the crypto meltdown. Additionally, these lenders “generally don’t have cryptocurrencies or funds to invest in. They also haven’t lent much money to emerging markets for new money.” NYT Explained.
Still, Wall Street banks face problems of their own because rising interest rates and tighter financial conditions “limit the number of companies that want to do business, leaving bankers idle.” NYT Said.
Even if traditional banks want to enter the decentralized market, they will need more capital given crypto’s risk profile. Remember June 2021 when the Basel Committee on Banking Supervision proposed giving cryptos like Bitcoin (BTC-USD) and Ethereum (ETH-USD) extraordinarily high risk weights to allow lenders to lend to people to buy more crypto . to prevent the way it happened. Through the securitization of home mortgages during the housing bubble of 2006/2007.
This hasn’t stopped the megabank from offering crypto-related deals to its customers. For example, Goldman Sachs (NYSE:GS) said in March that it is looking to expand its institutional crypto offering with over-the-counter bilateral options. And asset manager BlackRock (NYSE:BLK) said it is considering offering crypto services as customer interest grows.
Some of the other major banks that have tumbled into crypto over the past year include Citigroup (C), JPMorgan Chase (JPM), and Morgan Stanley (MS).
Earlier (July 2nd), Bitcoin completed its worst one-year halving in its 12-year history; What is H2 for?
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