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Pressure is building on Wall Street banks to accept bitcoin as a legitimate asset class and it's coming from within, CNBC has learned.

Last month, during a town hall meeting held for thousands of JPMorgan Chase traders and sales personnel around the world, global markets head Troy Rohrbaugh acknowledged a question that is increasingly being asked by the bank's own employees: When will they get involved in bitcoin?

To answer that question, Rohrbaugh, who had logged into the Jan. 18 Zoom call from his New York office, brought on his boss, JPMorgan co-president Daniel Pinto, according to people with knowledge of the meeting.

In a response that took up a chunk of the hour-long call, Pinto signaled he was open-minded about bitcoin, said the people, who declined to be identified when speaking about an internal event. When asked later by CNBC to clarify his remarks, Pinto, who leads the world's biggest investment bank by revenue, said the firm's decision would be informed by whether a critical mass of clients wanted the firm to trade bitcoin.

"If over time an asset class develops that is going to be used by different asset managers and investors, we will have to be involved," Pinto said in an interview. "The demand isn't there yet, but I'm sure it will be at some point."

JPMorgan traders aren't the only ranks of the cryptocurious at big banks. Last week, Goldman Sachs hosted a private forum with Mike Novogratz, the CEO-founder of crypto firm Galaxy Digital, for employees and clients. Novogratz expounded on his thesis for bitcoin, ethereum and other digital assets as well as their macroeconomic backdrop during the 90-minute virtual event.

Wall Street's newfound openness to cryptocurrency shows that the industry is being forced to contend with bitcoin as its latest dizzying ascent and increased adoption among institutional investors, corporations and fintech competitors spark fears of being left behind.

Banks, which generally face the highest regulatory scrutiny among financial firms because of the breadth of their operations and crucial role in the economy, have been largely reluctant to play in the crypto space, preferring to focus on related technology including blockchain. If one of the six biggest U.S. banks decides to embrace bitcoin, it would be a major stamp of legitimacy for the nascent asset class.

During bitcoin's earlier 2017-era boom cycle, banks including Goldman flirted with the idea of setting up dedicated crypto trading desks, but they ultimately shelved most of their plans. Born less than a decade earlier out of the wreckage of the global financial crisis, bitcoin was deemed too speculative and risky for bank clients. As the price of bitcoin skyrocketed in late 2017, JPMorgan CEO Jamie Dimon called bitcoin a fraud that wouldn't end well.

But by merely continuing to exist through 2018 and 2019, lean years known as crypto winter when bitcoin traded for below $4,000, the technology showed its staying power. Then the coronavirus pandemic struck, and governments led by the U.S. unleashed trillions of dollars in support for markets, businesses and individuals during the crisis.

A new narrative emerged, seemingly tailor-made for the era and adopted by billionaire hedge fund managers like Paul Tudor Jones and Stanley Druckenmiller: Bitcoin, which is limited in supply by design, is a hedge against inflation and the debasement of the U.S. dollar.

Fear of currency debasement is the major theme of clients who ask about bitcoin, according to the head of a major bank's wealth management business for clients worth at least $25 million. The bank is considering matching buyers and sellers of bitcoin for clients, but is studying how to integrate the cryptocurrency into its risk management systems.

There is irony here: In a few short years, bitcoin went from an idealistic technology meant to cut out banks and other intermediaries to a store of value used mostly by rich people so they can remain rich.

Now, as a steady stream of news on adopters seems to propel bitcoin ever higher, industry insiders say it's only a matter of time before traditional banks get more involved.

In particular, JPMorgan's Pinto cited the move last month by BlackRock, the biggest asset manager in the world, to add bitcoin futures as an eligible investment in two of its funds as evidence of broader adoption. Regulation of bitcoin trading would be manageable, Pinto said, adding that if it happened, trades would involve vetted clients and reputable exchanges including Coinbase.

This week alone, electric car manufacturer Tesla became the latest company to plow corporate cash into bitcoin, and payments network Mastercard and custody bank BNY Mellon said they will become more involved in crypto. With each announcement, the likelihood rises that banks, including JPMorgan and others, decide to join the party.

Damien Vanderwilt, co-president of Galaxy Digital, Mike Novogratz founder of Galaxy, and Chris Ferraro, co-president of Galaxy

Source: Galaxy Digital

"For the large banks, the volume of client inquiry and demand at some point will break the camel's back," said Damien Vanderwilt, co-president of Galaxy and head of its global markets division. "Banks eventually get strong-armed into developing these products by their clients."

Vanderwilt would know. Before joining Galaxy last month, he spent more than two decades at Goldman Sachs, where he led efforts to modernize the bank's trading infrastructure, most recently as a partner and global head of fixed-income execution services.

During his tenure, there were a handful of times when his bank was slow to adopt new trading techniques or spot emerging trends like quantitative trading, which eventually forced them to play catch-up, he said.

For banks to avoid a similar fate with crypto, Galaxy which views itself as a bridge between established finance and digital natives can help accelerate the development of products for their clients, he said.

Vanderwilt hinted at upcoming collaborations with traditional banks, saying "it's possible Galaxy could help Goldman and other banks facing the same challenges; we're uniquely positioned to do that, as the nexus for financial services in the digital asset sector."

As for adopters in the corporate world, Vanderwilt said many companies haven't yet publicly disclosed their bitcoin investments. "You're going to see a range of releases over 2021, there will be more corporates, pensions, more insurance companies" investing in bitcoin, he said.

Meanwhile, as its price continues to surge, some traders at big banks eye bitcoin's charts with envy. Just two months ago, bitcoin made headlines for breaching $20,000 for the first time. On Thursday, it traded for more than $48,000, according to Coin Metrics.

"In this industry, we're always looking for things that make money," said a trader who only agreed to be quoted on condition of anonymity. "And there's this shiny thing that's so freaking volatile and we're told we can't touch it it's like the forbidden fruit."

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Feeling the heat from employees, Wall Street banks get closer to adopting bitcoin - CNBC

Bank of New York MellonCorp., the nations oldest bank, is making the leap into the market for bitcoin, a sign of broader acceptance of the once-fringe digital currency.

The custody bank said Thursday it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. Custodians like BNY Mellon keep track of money managers assetswhether they are physical things like real estate or cash housed in an account with another bankstoring some themselves while attesting to the existence of others.

BNY Mellon said it would allow digital assets to pass through the same plumbing used by managers other, more traditional holdingsfrom Treasurys to technology stocksusing a platform that is now in prototype. The bank is already discussing plans with clients to bring their digital currencies into the fold.

Digital assets are becoming part of the mainstream, said Roman Regelman, chief executive of BNY Mellons asset-servicing and digital businesses.

Until now, those money managers have had to use separate custodians for their cryptocurrency holdings, Mr. Regelman said

Link:
Bitcoin to Come to Americas Oldest Bank, BNY Mellon - The Wall Street Journal

For most of the past 25 years, Michael Saylor was a relatively low-profile tech executive running a boring software firm in Tysons. During the pandemic, however, his career took an unexpected turn when he made a nearly $500-million bet on a notoriously unpredictable cryptocurrency. The transformation began last March, when Saylors company, MicroStrategy, was looking for a place to park a half billion dollars in reserve funds. In August, he began buying up hundreds of millions of dollars in Bitcoin, the trendy currency that has fascinated digital risk-takers since it was introduced in 2009. Its the best money created in the history of the world, Saylor says. Then, in December, MicroStrategy went even further, announcing it was taking on $650 million in debt in order to, yes, buy more Bitcoin.

Bitcoins volatility is one of its defining features; its value plunged from $19,000 per unit in 2017 to less than $4,000 the following year. By early 2021, a Bitcoin was worth more than $40,000. Saylor sees the cryptocurrency as a great way to protect his companys money from inflation, which he thinks will skyrocket.

Will that huge bet pay off? Well have to wait on that one, because Saylor claims he wont sell his Bitcoin trove for at least 100 years. But in the meantime, Saylor has himself become something of a celebrityone of the most prominent cryptocurrency evangelists. His Twitter following has surged to more than 300,000, and he now fields interview requests from the kind of national business publications that werent terribly interested in MicroStrategy before. Of course, by prominently advocating for Bitcoin, he helps protect the value of his own investment.

Born in Nebraska and raised mostly in Ohio, Saylor is an MIT alum who moved his six-year-old company from Delaware to the Washington area in 1995, and his net worth was at one point estimated to be in the billions. Hes also had his share of controversy: In 2000, he settled with the SEC over charges of financial impropriety (without admitting guilt). More recently, he has been an opponent of some Covid safety measures.

Saylors Bitcoin gamble has so far looked prescient. Its price has exploded by a factor of seven since March 2020, and MicroStrategys stock price has surged fivefold. Even so, in December, Citigroup analysts recommended that investors start selling MicroStrategy shares, citing concerns about overvaluation as well as Saylors disproportionate focus on Bitcoin vs. running the business.

Saylor waves away such criticism. Bitcoin is a radical new thing, he says, so if you are in the old paradigm, your view would be this is just scary and risky. Plus, his crypto fame is paying off in other ways: I think probably it would cost us $100 million a year to buy the kind of publicity that we now get for free.

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Michael Saylor Explains Why He's Investing More Than $1 Billion in Bitcoin - Washingtonian

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Were well into the first quarter of 2021 now, and its a good time to take stock of whats behind us, and how it will impact what lies ahead. Goldman Sachs strategist Jan Hatzius believes that we are on an upward trajectory, with better times ahead. Hatzius sees the developed economies expanding as the corona crisis recedes. For the US, particularly, he is impressed by the very substantial fiscal support implies in the latest COVID relief package. Even with that, however, Hatzius believes that Q4 was a weaker period, and we are still not quite out of it. Hes putting Q1 growth at 5%, and says that were going to see further expansion concentrated in the spring, and an acceleration to 10% growth rate in Q2. And by accelerations, Hatzius means that investors should expect Q2 GDP in the neighborhood of 6.6%. Hatzius credits that forecast to the ongoing vaccination programs, and the continued development of COVID vaccines. The Moderna and Pfizer vaccines are already in production and circulation. Hatzius says, in relation to these programs, That fact that we are developing more options and that governments around the world are going to have more options to choose between different vaccines [means] production is likely to ramp up in pretty sharply in incoming months Its definitely a major reason for our optimistic growth forecast. In addition to Hatzius' look at the macro situation, analysts from Goldman Sachs have also been diving into specific stocks. Using TipRanks' database, we identified two stocks that the firm predicts will show solid growth in 2021. The rest of the Street also backs both tickers, with each sporting a Strong Buy consensus rating. Stellantis (STLA) Weve talked before about the Detroit automakers, and rightly so -- they are major players on the US economic scene. But the US hasnt got a monopoly on the automotive sector, as proven by Netherlands-based Stellantis. This international conglomerate is the result of a merger between Frances Groupe PSA and the Italian-American Fiat-Chrysler. The deal was a 50-50 all stock agreement, and Stellantis boasts a market cap exceeding $50 billion, and a portfolio of near-legendary nameplates, including Alpha Romeo, Dodge Ram, Jeep, and Maserati. The deal that formed Stellantis, now the worlds fourth largest automotive manufacturer, took 16 months to accomplish, after it was first announced in October 2019. Now that it is reality the merger was completed in January of this year the combined entity promises cost savings of nearly 5 billion euros in the operations of both Fiat-Chrysler and PSA. These savings look to be realized through greater efficiency, and not through plant closures and cutbacks. Stellantis is new in the markets, and the STLA ticker has supplanted Fiat-Chryslers FCAU on New York Stock Exchange, giving the new company a storied history. The companys share value has nearly tripled since its low point, reached last March during the corona recession, and has stayed strong since the merger was completed. Goldman Sachs analyst George Galliers is upbeat on Stellantis future, writing, We see four drivers which, in our view, will enable Stellantis to deliver. 1) PSA and FCAs product portfolios in Europe cover similar segment sizes at similar price points 2) Incremental economies of scale can potentially have a material impact on both companies... 3) Both companies are at a relatively nascent stage [in] electric vehicle programs. The merger will prevent duplication and deliver synergies. 4) Finally, we see some opportunities around central staffing where existing functions can likely be consolidated... In line with this outlook, Galliers rates STLA a Buy and his $22 price target indicates room for 37% growth in the year ahead. (To watch Galliers track record, click here) Overall, this merger has generated plenty of buzz, and on Wall Street there is broad agreement that the combined company will generate returns. STLA has a Strong Buy consensus rating, based on a unanimous 7 buy-side reviews. The stock is priced at $16.04, and the average target of $21.59 is congruent with Galliers, suggesting a 34.5% one-year upside potential. (See STLA stock analysis on TipRanks) NRG Energy (NRG) From automotive, we move to the energy sector. NRG is a $10 billion utility provider, with dual head offices in Texas and New Jersey. The company provides electricity to more than 3 million customers in 10 states plus DC, and boasts a over 23,000 MW was generating capacity, making it one of North Americas largest power utilities. NRGs production includes coal, oil, and nuclear power plants, plus wind and solar farms. In its most recent quarterly report, for 3Q20, NRG showed $2.8 billion in total revenues, along with $1.02 EPS. While down year-over-year, this was still more than enough to maintain the companys strong and reliable dividend payment f 32.5 cents per common share. This annualizes to $1.30 per common share, and gives a yield of 3.1%. Analyst Michael Lapides, in his coverage of this stock for Goldman Sachs, rates NRG a Buy. His $57 price target suggest an upside of 36% from current levels. (To watch Lapides track record, click here) Noting the recent acquisition of Direct Energy, Lapides says he expects the company to deleverage itself in the near-term. After NRGs acquisition of Direct Energy, one of the larger electricity and natural gas competitive retailers in the US, we view NRGs business as somewhat transformed. The integrated business model owning wholesale merchant power generation that supplies electricity that gets used to serve customers supplied by NRGs competitive retail arm reduces exposure to merchant power markets and commodity prices, while increasing FCF potential," Lapides wrote The analyst summed up, "We view 2021, from a capital allocation perspective, as a deleveraging year, but with NRG creating almost $2bn/year in FCF, we see a pick up in share buybacks as well as 8% dividend growth ahead in 2022-23." Were looking at another stock here with a Strong Buy analyst consensus rating. This one based on a 3 to 1 split between Buy and Hold reviews. NRG is trading for $41.84 and its $52.75 average price target suggests a 26% upside from that level on the one-year time frame. (See NRG stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that unites all of TipRanks equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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