Does Bitcoin Really Need Wall Street?


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The expectation that Bitcoin's price will increase rapidly once institutional money starts flowing into the cryptocurrency, has resulted in a lot of Bitcoin holders eagerly awaiting Wall Street's formal entry in the crypto-markets. But does Bitcoin really need Wall Street?

Fraud in the FX markets
Global banks have paid over $10 bln in penalties to settle allegations that they defrauded their clients while engaging in foreign currency trades on their behalf. The banks typically shortchanged their customers by front-running - a process of executing trades for the bank's proprietary trading desk before executing trades on their client's behalf.

They used their knowledge of the client's impending trade to make profits for their bank. The list of banks who have settled include Bank of America, Citi, HSBC and Barclays. The penalties paid by the banks may not be the end of the story - a former HSBC FX trader, Mark Johnson, has been convicted on nine charges of fraud for front-running a $3.5 bln order of Cairn Energy to convert dollars to pounds.

Commodities - affecting main street
Big banks have come to play a large role both in the physical commodities space as well as the market in commodity derivatives. After Goldman Sachs entered the aluminum business in a big way, it led to an increase in prices.

There were allegations that this was not just due to simple supply-demand imbalance, but due to an element of market manipulation as well. It led to traditional users of aluminum, like Coca Cola complaining to the LME about how these actions were impacting it. Goldman has been fined for causing a spike in oil prices as well. More recently, Barclays has been sued for $850 mln by a hedge fund for misusing the knowledge of its trades and ramping up the price of copper.



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