Bitcoin: Wall Street comes on board

Regardless of the advice provided by financial advisors, more and more people are choosing to include Bitcoin in their savings and retirement accounts. Bitcoin is going mainstream. Today’s Financial Times is reporting that SecondMarket, a New York based trading platform, which last year launched a Bitcoin fund for wealthy and institutional investors, has announced that it intends to launch another Bitcoin investment fund later in 2014, this time for ordinary, or less sophisticated investors. SecondMarket’s Bitcoin investment trust, or BIT, will be trading on OTC markets’ OTCQX, an electronic exchange, pending expected approval from the Financial Regulatory Authority and OTC Markets. CEO of SecondMarket, Barry Silbert, said:

“Any investor in the US with a retail brokerage account will be able to buy shares.”

The BIT is similar to the SPDR Gold Shares exchange, where the investment tracks the Bitcoin price index with dollar denominated exposures, without the need to buy bitcoins directly or to store the investments in wallets. The BIT is audited externally by Ernst and Young and the bitcoins within the portfolio are safeguarded by state of the art security technology. Silbert has stated that assets held were ata level of $45.9 Million on April 1st. However, it must be pointed out that not all financial advisers see the development of a direct investment vehicle for Bitcoin as a positive development. Whether they view the development of a direct Bitcoin investment vehicle as a threat to their investments or as a threat to their investors, and potential investors, is simply a matter of perspective.  Kim Forrest, the vice-president and senior equity analyst at Fort Pitt Capital Group, a Pittsburg based investment adviser, stated:

I get that people want to have some non-affiliated store of value, but this really, is not it.” She went on to say “This is something that is totally fabricated.”

However John Rekenthaler, the vice-president of research at Morningstar, the fund research firm, stated that a Bitcoin based investment fund was “simply inevitable.” Mr. Rekenthaler further stated that:

The argument for including gold in retirement portfolios is no less dubious.

I have previously written about the need to police cryptocurrencies, and it is now apparent that investing in bitcoins via a competent and credible investment company, such as SecondMarket, removes much of the risk. The collapse of Mt Gox has made investors more distrustful and cautious in a currency that depends upon mutual distrust for its very existence. It must be seen as a very positive development that Wall Street is moving into Bitcoin, and the currency is slowly moving away from associations with shadowy transactions, such as those on the Silk Road site, to the acknowledgements of legitimacy shown through mainstream investor acceptance. More and more investors are getting ready to come on board, this is also happening when retailers are accepting bitcoins on an ever growing level. Chicago Sun-Times has reported an 11% increase in sales, directly as a result of accepting Bitcoin and large companies such as TigerDirect and Overstock have also reported increased sales worth several hundreds of thousands of dollars. Bitcoin is growing in use and as the value falls, make no mistake, Wall Street is waiting to pounce, and they didn’t get to where  they are by buying at too high price, so let’s not sell up just yet.