- John Haar is the managing director of the Swan Bitcoin crypto services platform.
- Haar breaks down the concept of “sound money” and the added value of bitcoin for traditional finance.
- Amid a long bear market, giant Wall Street firms continue to announce crypto partnerships.
BNY Mellon, the oldest bank in the United States, said Tuesday that it will soon hold cryptocurrencies for its customers. In September, private equity giant KKR made part of its healthcare fund available on the layer 1 blockchain, Avalanche. The series of news closely follows a partnership between the $10 trillion asset manager, BlackRock and Coinbase.
“Our institutional clients are increasingly interested in exposure to digital asset markets and focused on how to effectively manage the operational lifecycle of these assets,” said Joseph Chalom, global head of strategic partnerships for the BlackRock’s ecosystem, in a blog post in August.
These moves mark key milestones for traditional financial institutions, as Wall Street begins to dig deeper into the nascent – and often unstable – world of crypto.
John Haar, managing director of digital asset services platform Swan Bitcoin, previously spent 12 years at Goldman Sachs. He says bitcoin is the biggest contender to gain traction in legacy finance and attract more institutional interest.
“As far as what they’re actually going to embark on from a business standpoint, I agree Bitcoin took the big chunk out of it,” Haar told Insider in an interview.
Investors also saw the first wave of institutional interest in crypto through bitcoin.
Morgan Stanley has become the first major US bank to offer certain high net worth clients exposure to bitcoin. Meanwhile, Paul Tudor Jones – one of the most successful hedge fund managers – said crypto was in his portfolio. MicroStrategy, a publicly traded software company founded by Michael Saylor, purchased $425 million worth of bitcoins beginning in August 2020.
“The logical next step for bitcoin is to replace gold as a non-sovereign store of valuable assets,” Saylor told MarketWatch’s Best New Ideas in Money Festival.
First, the prop value of bitcoin, says Haar, is the concept of “sound money”, a currency that is not subject to sudden depreciation or appreciation in value. The token is “rare”, “censorship-resistant” and a store of value as it has a fixed supply of 21 million and lacks a centralized governing body. (Essentially, there is no Federal Reserve of bitcoin, where you can inject more tokens during a bear market.)
“I think Bitcoin is an easier sell, but I think we’re still very early in terms of their potential buy-in. I think when institutions get into this space, it will be easier for them to pitch in and investment committees for bitcoin.”
Haar also says institutions have seen bitcoin weather the bear market better than most. Altcoins like solana and avalanche are both down nearly 90% from their all-time highs, respectively, according to Messari on Friday.
As the Federal Reserve continues to raise interest rates to combat high inflation for nearly 40 years, the price of bitcoin has also continued to decline. According to Messari, ethereum and bitcoin are both down more than 70% from record highs on Friday, with the industry’s total market capitalization also slashed by two-thirds.
“I am aware that the price of bitcoin fell quite dramatically in 2022, but some crypto tokens literally fell to zero,” he said. “Relatively speaking, I think you could argue that bitcoin is a safer and more conservative investment compared to these things.
Elsewhere, others have argued that Ethereum will be the next big “on-ramp” for institutional adoption in crypto. This is partly due to the merger, the upgrade of the smart contract network, which reduced its energy consumption by more than 99% and reduced its emission.
“Will a reversal happen? It would take another big macro rally for risk assets to cement the institutional preference for Ethereum,” Joshua Lim, former chief commercial officer at Galaxy Digital, told Insider.
Lim added, “We have already seen massive inflows into Ethereum as a funding asset. During the 2017 cycle, retail investors crowded into Ethereum as an on-ramp for ICOs. In this cycle, institutional investors have recognized Ethereum as the base layer for a lot of DeFi and Stablecoin activity, so a lot of fresh capital has entered the asset class via Ethereum over Bitcoin.”