Wall Street mega-banks not plagued by cryptocurrencies (Cryptocurrency: BTC-USD)

While the momentum of the economic contagion effect in the cryptocurrency market continues to grow, Wall Street’s largest banks have not been affected, and in some cases benefited from the meltdown. New York Times reported on July 5th.

Retail investors, on the other hand, are suffering heavy losses in the wake of refueling cryptocurrencies.

For one reason or another, the crypto market is facing one of its worst bear markets with bitcoin (BTC-USD) of approx. 65% from the all-time high of $ 68.8K in November, and changed hands to $ 21.4K just before noon. 16.00 on Thursday. The cryptocurrency decline was exacerbated by the collapse of the algorithmic stable coin TerraUST (UST-USD) in May after it was released from the US dollar. Terra’s spread spread to the crisis-stricken cryptocurrency lender Celsius, which has suspended withdrawals for the past three weeks due to liquidity problems and falling token prices. And the next big player that failed was Three Arrows Capital, the crypto hedge fund that recently went bankrupt in the face of huge liquidations.

“Recent developments have further highlighted the importance of having a global minimum framework to reduce the risk of cryptocurrencies,” the Basel Committee on Banking Supervision said in a statement dated 31 May.

Partly thanks to regulatory restrictions, Wall Street banks have been unaffected by the crypto downturn. Also, these lenders “do not usually own crypto or run funds that invest in it. Nor have they borrowed much into the emerging market for new money,” NEW explained.

Wall Street banks, however, face their own problems as rising interest rates and tighter economic conditions have “limited the number of companies wishing to make deals, leaving bankers inactive” NEW so.

Even if traditional banks wanted to enter the decentralized market, it would require more capital given the risk profile of crypto. Remember in June 2021 when the Basel Committee on Banking Supervision proposed giving cryptocurrencies such as bitcoin (BTC-USD) and ethereum (ETH-USD) an extraordinarily high risk weighting to prevent lenders from creating loans for people to buy more crypto, like it which occurred during the housing bubble in 2006/2007 via securitization of mortgages.

This has not stopped the mega-banks from introducing crypto-related offers to their customers. For example, Goldman Sachs (NYSE: GS) said in March that they are seeking to expand their institutional crypto offering with bilateral over-the-counter options. And asset manager BlackRock (NYSE: BLK) said that they were researching to offer crypto services as customers’ interest increased.

Some other major banks that have entered the crypto market in the last year include Citigroup (C), JPMorgan Chase (JPM) and Morgan Stanley (MS).

Earlier (July 2), Bitcoin ended its worst half-year in its 12-year history; what is in store for H2?