Cryptotechnology: Here to stay

Digital is here to stay.

Crypto is part of the digital.

Crypto is here to stay.

The reason for this feeling is that the technology behind “crypto” is playing more and more a role in the financial world and the restructuring going to create the “new” world.

Firstly, the big banks, among other institutions, have invested a lot of time and money in the “crypto” technology, the blockchain.

The proof?

Paul Vigna writes in the Wall Street Journal:

The blockchain, sometimes called distributed ledger technology, is the plumbing that keeps the crypto markets running.

It is a program that uses an open record keeping system – a central ledger – to track assets and record transactions and information about the ownership of those assets.

Each participant operates from the same central ledger.

Big Wall Street Banks have been working on the blockchain for five years or so. First, the big banks don’t want to be left out of the game by not exploring the technology.

Although no major breakthroughs have been achieved, their efforts will not diminish. The largest “are engaged in an arms race to build competing platforms.”

JPMorgan Chase (JPM) has a platform called Onyx that has been in operation since 2020, and it has processed more than $350 billion in repo transactions.

Tom Farley, former president of the New York Stock Exchange, has stated that “Blockchain technology is going to rewire all financial services.”

So Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. are two of the organizations leading this work. They do not skimp on the resources they spend on the project.

And while we don’t see the word “crypto” in these descriptions, you can bet it’s totally in the picture.

The important thing is that the biggest banks are there and playing with the technology. They want to build systems that run faster, are less expensive and ultimately are more profitable.

And the systems would not be as open as “crypto” assets, such as Bitcoin (BTC-USD), they would be “permission” networks, focusing on who is allowed into the system.

The big banks are not going to disappear, but will only build from the basics, which they seem to have already incorporated into their operations.

We are going to see more and more of this type of activity happening in the big banking space over the next few years. In fact, we are really waiting for the leading banks, such as JPMorgan Chase & Co., to move faster to take the lead in this new technology, which will be combined with more and more “crypto” options to draw in this customer sector.

This is coming sooner than we expect.

Reason?

The consolidation of what is left of the “crypto world.”

Consolidation of crypto

As is typical of a “new” component of the economy, innovation brings with it a rush into new initiatives, a collapse and a consolidation.

The consolidation is now taking place within the “crypto world.”

I have written quite a few times about Sam Bankman-Fried and what he wants to do in the crypto world.

According to Alexander Osipovich, writing in the Wall Street Journal:

Crypto is ailing. Sam Bankman-Fried is betting a billion dollars that he can fix it.

CEO of cryptocurrency exchange FTX Trading Ltd. has appointed himself the industry’s savior – and crypto investors are watching his moves closely after months of market carnage. This year he bailed out one troubled digital currency lender and tried to stabilize another. He acquired crypto exchanges in Canada and Japan. He appeared in magazine ads opposite supermodel Gisele Bundchen in an effort to keep mainstream investors enthusiastic about the crypt despite the downturn.

Mr. Bankman-Fried is 30 years old, a billionaire and a strong believer in cryptocurrencies. He says his ultimate goal is to bring crypto to the masses.

Mr. Bankman-Fried wants to turn FTX into a kind of financial supermarket, “offering everything from lending to stock trading to payments.”

He also realizes that the crypto world needs to be regulated, and he wants to work closely with regulators to build the environment of the future so that there can be as much freedom for innovation as possible, but with sufficient oversight so that the markets are not abused.

Mr. Bankman-Fried is not afraid of traditional products and services and is not afraid of traditional markets. Some investors in FTX are actually from these traditional markets.

In his worldview, they must all be tied together. Furthermore, Mr. Bankman-Fried has a piggy bank to continue with his plans.

In 2021 and early 2022, he has built up a war chest of around $2.0 billion. Note that the “cash” is held in dollars and not crypto.

The world moves forward

So the transition to the new digital world continues.

Not only are “newbies” consolidating what they’ve started and moving the industry to the next phase, but the traditional players are also testing the waters in this new space and seeing how things will ultimately work.

This is the way the world works. What will be the result? Who knows. We find ourselves in a space of radical uncertainty. What we see is that some people succeed in this new world and some do not.

Some people help the movement into the new world, and they represent an exciting picture. The possibilities are there. The people are there. The money is there. The digital world is going to move on. What the new world will look like, none of us knows.

But, fortunes will be made and fortunes will be lost. This is just the nature of the game. I still believe that JPMorgan Chase & Co. is one place to keep your eyes on.

I also think that Bankman-Fried is also one to keep an eye on.

Welcome to the digital world.