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Crypto just hit a major turning point in its evolution: legacy Wall Street is finally embracing it

April 7, 2022, 9:09 PM UTC

Wall Street is finally beginning to “ch-ch-ch-ch” change its tune on cryptocurrencies.

And it seems to be taking a cue from David Bowie, who encouraged listeners in 1971’s “Changes” to “turn and face the strange.”

Just five years ago, crypto was essentially a nonstarter for much of the legacy financial industry. The hacks. The regulatory questions. The euphoric sentiment. It was a nightmare waiting to happen, many executives concluded. Bridgewater’s Ray Dalio called Bitcoin a “bubble.” JPMorgan Chase CEO Jamie Dimon made his now infamous “it’s-worse-than-tulip-bulbs” comment. Even the Wolf of Wall Street himself, Jordan Belfort, who is now well-entrenched in the world of digital assets, was raising concern.

Now, like the ugly duckling that became a swan, the nearly $2 trillion crypto market—with all of its warts—seems to be undergoing a glow-up in the eyes of some of the world’s most powerful financial institutions.

Hedge funds, including the behemoth Bridgewater Associates, are plowing in. Investment banks like Goldman Sachs and Cowen are building out and expanding their crypto trading capacities for institutional clients. Custodian banks including BNY Mellon and State Street are partnering with crypto-native companies. And in the latest signal of the growing interest, IEX Group, the stock exchange operator, revealed Tuesday that it has brought aboard the crypto trading unicorn FTX.US as an investor with its plans to enter the digital asset market beginning to take shape.

“It’s something that most financial institutions are looking to find a way to get involved with,” FTX CEO Sam Bankman-Fried recently told me, “even if they don’t see one yet.”

Pockets of the traditional finance community have, in reality, long been involved with digital assets.

Chicago trading shops like Jump and DRW ventured into the market years ago. Meanwhile, exchange giants CME Group and Cboe Global Markets introduced Bitcoin futures, the first investment products of their kind in the U.S., back in 2017. Even those companies aren’t done entering the market, though. On Thursday, Bloomberg reported that CME is now planning to offer reference rates and indices on Solana, Uniswap, and Cardano, among other cryptos.

But, between the swelling count of assets invested in it and the growing ways that blockchain technology can be used, the crypto market may have finally reached a turning point in its evolution, making the latest rush into it that much more noteworthy. “Crypto has been one of the great stories in finance over the course of the last 15 years,” Citadel CEO Ken Griffin, a long-standing crypto skeptic, recently told Carlyle Group cofounder David Rubenstein. “And I’ll be clear, I’ve been in the naysayer camp over that period of time. But the crypto market today has a market capitalization of about $2 trillion in round numbers, which tells you that I haven’t been right on this call.”

Of course, the market still has—and likely will always have—plenty of bears on Wall Street. Yet, even Dimon, the JPMorgan chief who doesn’t see crypto as real currencies, recognizes the power of the space, writing to shareholders in a letter that “decentralized finance [DeFi] and blockchain are real, new technologies that can be deployed in both public and private fashion, permissioned or not.” And with federal regulators in the U.S. and abroad now devising plans for how to oversee the space, the adoption of crypto seems only primed to pick up even more—no matter how strange it once seemed.

Book your tickets: It’s conference season. The crypto industry has descended onto Miami Beach this week for Bitcoin 2022. (Have you seen the laser-eyed bull?) FTX and SALT are hosting Crypto Bahamas at the end of the month. And Consensus follows soon after in June. Know of any others? Let me know—I’m on the hunt for conferences to possibly attend. Even better if they’re in or around my home base of Chicago. I don’t know if I’ve mentioned it or not, but I have two kiddos.

How is my newsletter-ing? You know that sticker on the back of a semi-truck barreling down the highway that asks “How is my driving?” with a phone number below it? Well, we sort of have one of those. It’s a survey, and you should take it.

Declan Harty
@declanharty
Declan.harty@fortune.com

DECENTRALIZED NEWS

Credits 🚀 

"Axie Infinity" maker Sky Mavis brought in $150 million in new funding from the likes of Binance and Andreessen Horowitz to pay back users hit by the massive Ronin Network hack... Financial technology company Bolt Financial is buying crypto startup Wyre Payments in a deal valued at about $1.5 billion... Binance.US has raised $200 million at a $4.5 billion pre-money valuation...  Assets under management at crypto investment firm Paradigm have spiked 343% from late 2020... MicroStrategy is now taking out loans backed by Bitcoin to buy more Bitcoin... OpenSea is starting the listing process for Solana-built NFTs... Users of the company formerly known as Square (now Block) can get paid in Bitcoin... Mike Novogratz of Galaxy Digital foresees Bitcoin going "to the moon" if and when the economy slows down in the wake of the Federal Reserve's newly adopted hawkish mindset... Mark Cuban is "very bullish" on the upcoming Ethereum merge... ESPN is working with Tom Brady's NFT platform Autograph to create a set of its own digital collectibles... UFC fighters will soon be getting paid bonuses in Bitcoin.

Debits 🐻 

The U.S. Securities and Exchange Commission wants to find a new way for crypto trading venues to register with the agency... Meta is getting back into the digital token game, with the virtual currency for the metaverse being called internally "Zuck Bucks"... Losses linked to hacks and frauds in the world of Web3 were up 695% year-over-year during the first quarter... Dogecoin's gains made following noted holder Elon Musk taking a nearly $3 billion stake in Twitter have evaporated just days later... Bitcoin mining company Marathon Digital is open to being bought, CEO Fred Thiel says.

FOMO NO MO

SBF doesn't want to join the yacht club. Sam Bankman-Fried, the beanbag-chair sleeping, Toyota-Corolla driving billionaire CEO of cryptocurrency exchange FTX, is a "thought experiment from a college philosophy seminar come to life," Zeke Faux writes for Bloomberg Markets. The 30-year-old has amassed a fortune in excess of $20 billion, making Bankman-Fried one of the richest people in the world. But only a little of it will wind up staying in Bankman-Fried's pockets, as the effective altruist has pledged to keep only 1% of his earnings (or at the minimum $100,000 a year) and give away the rest. 

From the article:

For all his wealth, Bankman-Fried tells me his core philosophy remains the same. He’ll keep enough money to maintain a comfortable life: 1% of his earnings or, at minimum, $100,000 a year. Other than that, he still plans to give it all away—every dollar, or Bitcoin, as the case may be. He’s a kind of crypto Robin Hood, beating the rich at their own game to win money for capitalism’s losers. Yet he’s now part of the power structure that causes the problems he says he wants to fix. He makes big political contributions and pushes his company’s agenda in Washington. And so far he’s donated less to charity than he’s spent on naming rights for the Miami Heat’s arena (cost: $135 million over 19 years) and airing a Super Bowl ad with comedian Larry David portraying a curmudgeonly crypto skeptic (an estimated $30 million). He sees no inconsistency; he’s investing to maximize the amount of good he does, eventually, even if he’s risking what he’s already made in crypto.

BUBBLE-O-METER

95%

OpenSea challenger LooksRare has a bit of a wash trading problem, as my colleague Anne Sraders recently reported. Wash trading is the practice of someone buying and selling the same asset, in this case an NFT, to themselves so that they can capture the rewards that come with trading. In most asset classes, like U.S. stocks, it's illegal. But data from CryptoSlam show that wash trading accounted for 95% of activity on the NFT marketplace through much of March, as users looked to earn more tokens. 

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MEMES AND MUMBLES

Can I NFT my venti blonde roast? In the face of a growing union push at stores across the U.S., Starbucks is turning its attention to non-fungible tokens, Howard Schultz, who has once again returned to the coffee chain's C-suite on an interim basis as CEO, said Tuesday. What that looks like is not yet clear, but Schultz reportedly told Starbuckians that none of the companies, celebrities, or influencers already dabbling in NFTs "has the treasure trove of assets that Starbucks has—from collectibles to entire heritage of the company."

This is the web version of The Ledger, Fortune’s weekly newsletter covering financial technology and cryptocurrency. Sign up here to receive future editions.