When Ahmad first came across Ether in 2016, the same year he joined BlackRock in London, he invested all the savings he had available from six years working for an investment consultancy in Northern England, or 10,000 pounds ($13,250). While declining to say how much money he made from his investments, which included participation in initial coin offerings, he said Ether cost about $10 when he invested. It now trades above $500 and cost more than $1,400 earlier in the year.
“If you start mentally spending this money it will hurt you when it falls,” said Ahmad, who quit BlackRock in March. “If you enjoyed the volatility on the way up you have to accept it falls as hard if not harder at times.”
It’s not only financial professionals who saw the extreme volatility and immature market infrastructure of cryptocurrencies as a money-making opportunity. Scammers and criminals have also targeted the market, prompting regulators from China to the U.S. to scrutinize digital assets.
Authorities worry virtual currencies are susceptible to fraud because exchanges are not actively pursuing cheaters, wild price swings make it easy to push valuations around and digital assets aren’t currently subject to regulations like those that govern stocks and bonds. The Justice Department has opened a criminal probe into whether traders are manipulating prices, while the Securities and Exchange Commission is investigating initial coin offerings.
The whipsaw ride in cryptocurrencies in the past six months, which saw Bitcoin trade between around $6,000 and $20,000, has fueled debate among laymen and Wall Street luminaries alike over whether financial institutions should seek to make money from digital assets or avoid them like the plague. Whether they embrace it or not, the rise of crypto has forced the biggest banks and money managers to acknowledge an asset class that could previously be dismissed as a side-project for libertarians or a playground for criminals.
While many on Wall Street preach the virtues of blockchain, opinion is divided on the benefits and longevity of cryptocurrencies. Digital assets have even proven divisive within firms, with managers often at odds with subordinates, said Adam Grimsley, a former BlackRock fixed-income specialist who co-founded a crypto hedge fund in London called Prime Factor Capital.
“You’ve seen a bifurcation internally at many larger houses where senior managers are very skeptical about crypto, while graduates and younger team members are very positive,” said Grimsley. “The youngsters may have less intellectual baggage and may be more open-minded, but they also have less responsibility for managing risk and working out the practicalities of bolting on crypto to the existing business.”
And while their seniors work out the institutional stance, the juniors are leaving.
“Crypto is certainly a market that’s pulling away real talent from financial services,” said Chris Matta, 28, who left Goldman Sachs’s money management unit last year to co-found an investment firm for digital currencies called Crescent Crypto Asset Management.
This article was provided by Bloomberg News.