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First came the technology, then the investment and venture capital giants, and now the large traders as Bitcoin infiltrates the institutions of Chicago and New York
In line with LeapRate’s observations with regard to the evolution of the digital currency industry in that companies ranging from technological development to exchange operations have attracted the attention of large-scale venture capital investors and achieved regulatory acceptance, the vast, institutional and proprietary trading desks of New York and Chicago are now turning their attention toward Bitcoin.
With regulators and technology firms alike having highlighted that the future of Bitcoin would depend on the quality, security, financial backing and regulatory oversight of its infrastructure, it became apparent that the large traders would be attracted once the virtual currency had made its transformation from a fringe enterprise into an international and bona fide instrument.
North America has led Bitcoin’s leap into the mainstream, with recent developments having been the creation of the BitLicense regulatory framework by New York State Superintendent of Financial Services Benjamin Lawsky, as well as some vast venture capital investments such as the $116 million raised by 21 Inc in March and $75 million raised by CoinBase earlier this year from large investment houses.
Security concerns have been largely quelled by the introduction of secure wallet solutions which in some cases operate with fingerprint and biometric facial recognition therefore being equally as secure as any standard onlin bank account.
This has led to some of the largest proprietary traders and investors to begin testing the waters for a bigger move into Bitcoin, giving a potential boost to what had until now been regarded as a fledgling industry.
The Wall Street Journal today reported that while still cautious of becoming exposed to “cryptocurrencies,” some of the firms, which trade with their own money on their own behalf, say they see potential for big profits in trading bitcoin as more investors enter the market and financial-services firms use the currency to streamline transactions.
Their involvement could help reduce volatility in the market for Bitcoin, which has struggled to gain legitimacy in part because of concerns not just about security and recourse should things go awry, but also about wild swings in its price which during the dark days of the demise of Japanese Bitcoin exchange Mt.Gox and the seizure by the US government of anonymous marketplace Silk Road ranged from 240 dollars to 1 BTC in March, rising to over 1,000 dollars to a Bitcoin in the middle of the year, and back down to 600 dollars to a Bitcoin at the year’s end.
Clearly there is a correlation between the stability and prospective future of Bitcoin and the stability of its price. Since Switzerland introduced regulatory supervision for SBEX and allowed it to place Bitcoin ATMs across the country, the unveiling of the aforementioned BitLicense, and several well-funded technology firms and exchanges gaining the attention of seasoned capital partners, values have steadied tremendously, therefore, the natural progression following good infrastructure and stability is surely the influx of Bitcoin to the trading desks.
Many of North America’s well renowned companies with large proprietary trading groups also appear to have an appetite for greater exposure to Bitcoin.
Citadel LLC in Chicago and KCG Holdings, Inc. Class A (NYSE:KCG) in Jersey City, N.J., were among a small group of firms that have offered bids to buy shares of the Bitcoin Investment Trust since it listed last month on the OTC Markets, a platform typically used for trading shares of smaller companies that aren’t as heavily regulated as stocks listed on exchanges. The trust holds Bitcoin in a fund that issues shares to wealthy investors accredited by the Securities and Exchange Commission.
KCG spokeswoman Sophie Sohn explained to the Wall Street Journal that in addition to the engagement with the trust, her firm is “actively exploring various opportunities related to” Bitcoin. Citadel said it was not involved in Bitcoin apart from the bids offered for the trust, a spokesman said.
Wedbush Securities Inc., a company that has a great interest in FX and futures trading having bought KCG’s FCM KCG Futures recently, has made offers to buy shares of the trust, saw it as “a good place to get your feet wet” with bitcoin, said Gil Luria, a payment analyst at the Los Angeles-based investment bank. Launched by an unidentified software coder in January 2009, bitcoin is a digital currency that is created, or “mined,” by computers.
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