Earlier this week, Bloomberg reported Barclays, the $51 billion banking giant, is planning to launch a cryptocurrency trading desk to allow its clients to invest in the cryptocurrency market.
Barclays spokesman Andrew Smith said that the bank is monitoring developments in the cryptocurrency industry and is closely analyzing the rising demand for cryptocurrencies like bitcoin from investors in the public market.
“We constantly monitor developments in the digital currency space and will continue to have a dialog with our clients on their needs and intentions in this market,” spokesman Andrew Smith said.
Bitcoin is a Flu
The optimistic stance towards the cryptocurrency market by Barclays came less than two weeks after the bank released a controversial statement about the market by describing bitcoin as a disease. Barclays said that bitcoin is like a flu and implied that it has bubble-like characteristics.
“As more of the population become asset holders, the share of the population available to become new buyers — the potential ‘host’ population — falls, while the share of the population that are potential sellers (‘recoveries’) increases. Eventually, this leads to a plateauing of prices, and progressively, as random shocks to the larger supply population push up the ratio of sellers to buyers, prices begin to fall. That induces speculative selling pressure as price declines are projected forward exponentially,” Barclays said.
A team of Barclays analysts led by Joseph Abate further noted that the peak price of bitcoin and other cryptocurrencies may have passed, offering a negative viewpoint on both the short-term and long-term price trend of cryptocurrencies.
The most recent development in the cryptocurrency department of Barclays contradicts the statement of Abate and his team of researchers, as financial institutions will not commit to assets or cryptocurrencies they consider as a disease based on their models.
The model of banks and financial institutions is profit-based, and any operation that brings stable revenues to the banks will be supported. Although the cryptocurrency market is still at its early stage, it is possible that banks like Barclays see a unique opportunity in that their entrance into the market at this current stage would lead to a surge in liquidity, and would allow the bank to dominate the institutional investment aspect of the market in the short-term.
For many months, Goldman Sachs have also teased a potential launch of a cryptocurrency trading desk. In response to reports suggesting that the investment bank is interested in facilitating the growing demand for bitcoin from its clients, VISA executive and Bitcoin Foundation founder Jon Matonis stated will lead to a surge in liquidity, volume, and ultimately price of cryptocurrencies.“I think it’s fabulous that they’re getting into it because it brings in new liquidity. They’re going to develop futures markets, options markets — I even think you’re going to start to see interest-rate markets around bitcoin. We’re used to hearing things about Libor, the index for bitcoin interest rates is Bibor,” said Matonis.