Market Overview

10 Years After Lehman: Bitcoin and Wall Street Are Closer Than Ever

Within a couple of months of Lehman’s bankruptcy, though, a new piece of technology would debut – almost unnoticed – one that appeared to offer an alternative to this catastrophe-prone system. On October 31, 2008, an unidentified individual going by the name Satoshi Nakamoto published the bitcoin white paper to a cryptography mailing list. The paper described “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

Yet over the past decade, the worlds of bitcoin – and its cryptocurrency and blockchain offshoots – and traditional finance have begun to interact in ways almost no one would have predicted early on. Wall Street veterans are decamping to work for firms focused on cryptocurrency. Major financial institutions are flirting with blockchain. Ten years after bitcoin was born into the flames of the financial crisis, have the cryptocurrency community and Wall Street made nice?

To be sure, for all the hope it’s inspired (and acrimony it’s generated), bitcoin is far from toppling the incumbent financial system. Wall Street banks – most of them – not only survived the crisis, but have grown bigger than they ever were before it. Central banks and fiat money show no signs of going anywhere, and bitcoin remains a tiny sliver of the global monetary system.

“Coming from the world of traditional finance, I am quite optimistic about the intersection of the two,” said Carter. “I think cryptocurrency will eventually be financialized and will be custodied by large institutions, regulated markets will emerge, along with all the hallmarks of what will become essentially a vibrant virtual commodity market.”

Indeed, many in the cryptocurrency community appear to be welcoming the entrance of financial incumbents – for instance, bitcoin investors are holding their breath for SEC decisions regarding proposed bitcoin exchange-traded funds (ETFs).

Zooko Wilcox, old school cypherpunk and CEO of the Zcash Company, the point of cryptocurrency is not to “convert everyone else in the world to share our revolutionary fervor.” Rather it’s to provide people with “something they need – a fairer, safer, and more efficient financial system.” The kind of system, in other words, that Lehman’s bankruptcy proved the world didn’t have. Cryptocurrency “began with a small group of hardcore revolutionaries,” Wilcox said, but: “Success will mean billions of people finding cryptocurrency to be convenient and reliable without ever understanding either the scientific or the political revolutions behind it.”

10 Years After Lehman: Bitcoin and Wall Street Are Closer Than Ever, CoinDesk. Sep 13
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