One Firm Is Way Ahead of Wall Street on Bitcoin

[Hydrogen]

SAN FRANCISCO — While a number of large financial institutions have discussed trading Bitcoin, one firm has already begun doing it. Very quietly.

The financial firm, Susquehanna International Group in Bala Cynwyd, Pa., just outside Philadelphia, is one of the largest players in trading traditional investments like stocks, options and exchange traded funds, or E.T.F.s. Over the last two years, the privately owned company has also built up a trading desk of around a dozen people that buys and sells millions of dollars’ worth of Bitcoin and other virtual or cryptocurrencies in private deals.

Now the firm is opening trading to a small group of its 500 clients, with plans to expand.

The move is the latest sign that the virtual currency markets, which were once relegated to the fringes of the financial world, are being embraced by big, mainstream investors.

The parent company of the New York Stock Exchange, the Intercontinental Exchange, has been in talks about opening a subsidiary for cryptocurrency trading, and Goldman Sachs is on the verge of opening its own trading operation.

But Susquehanna, which has around 1,800 employees around the world, has a lot more money backing its trading desk — and a lot more ability to interact with clients — than the hedge funds and trading firms that have also been early participants in the virtual currency markets.

The arrival of big financial institutions has raised concerns among some Bitcoin aficionados, who worry that it will harden Bitcoin’s status as a speculative trading asset like gold and diminish hopes that it can be used in day-to-day transactions.

Not so, said Bart Smith, the head of the digital asset group at Susquehanna. The firm believes that Bitcoin and other cryptocurrencies inspired by it are likely to have a wide array of uses, but for now, he said, Bitcoin’s best bet is to challenge gold as a scarce commodity that can be moved around more easily.

The original Bitcoin software determined that only 21 million Bitcoin would ever be created. That cap isn’t expected to be hit until 2040(Hydrogen edit: the correct year is 2140***), and the limited number of tokens currently in circulation has made the online currency appealing as a commodity.

Mr. Smith said that he could also imagine Bitcoin, or some competitor, becoming a digital payment method for the internet — as Jack Dorsey, Twitter’s chief executive, recently predicted — but that he wasn’t too worried if that didn’t happen.

“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” he said.

Susquehanna first experimented with trading Bitcoin in 2014 after the investor twins Cameron and Tyler Winklevoss asked the firm about being involved with a Bitcoin E.T.F. that they had applied to regulators to create.

Regulators eventually denied that application. But Susquehanna kept its one Bitcoin trader on board, and then added a few more last year when the cryptocurrency markets took off.

The firm decided to step up its operation, and go out to clients, after seeing the success of Bitcoin futures contracts, which were introduced by exchanges in Chicago late last year and have been growing volume in recent months.

Susquehanna will trade futures, which are contracts tied to the future price of Bitcoin. It will also allow customers to buy and sell actual Bitcoin and a few other cryptocurrencies like Ether and Bitcoin Cash.

To make these available to customers, Susquehanna recently amended the broker dealer license that it has on file with regulators. That change will allow the company to trade cryptocurrencies that are labeled by regulators as securities. Regulators in the United States have recently indicated that many newly created virtual currencies — though not Bitcoin — should likely be categorized as securities and traded only by regulated entities.

Most of the cryptocurrency exchanges where Susquehanna trades are largely unregulated. Bloomberg recently reported that American authorities were investigating whether some traders were taking advantage of this to manipulate the price of Bitcoin by posting lots of trades that they didn’t intend to complete.

Mr. Smith said he had not seen clear evidence of manipulation, but cryptocurrency markets are still very immature compared with the other markets where Susquehanna trades, especially given the lack of regulations for many of the largest exchanges holding cryptocurrencies.

He said the single biggest problem for sophisticated investors was the security risk in holding virtual currencies. In other markets, Susquehanna doesn’t have actual custody of stocks or bonds.

Bitcoin was built so that users can hold and transfer their tokens with a password or private key that no one else knows. If the private key is compromised, a hacker can take the coins, and the owner has no way to get them back. That has led to big losses at several Bitcoin exchanges.

Susquehanna built its own systems for storing the cryptocurrencies it is holding for more than a day. To deter hackers, the private keys are kept in devices in an off-site facility that is not connected to the rest of the company’s computer systems.

“There were no financial services firms out there two years ago that were storing and moving large amounts of cryptocurrencies, so there is no road map,” he said.

Then there is the matter of trying to figure out on a daily basis what a single Bitcoin or Ether token should be worth.

There is still little agreement on what factors traders should take account of when deciding on a value for cryptocurrencies, given that many of the expected uses for digital tokens are still hypothetical. While Mr. Smith’s teams look at the technical and security specifications of the coins, it is much harder to answer the most important question: Will they be used as something other than a digital commodity?

“The value is: What do you think the best-case scenario of these different digital assets is in the future — and handicapping what is the percentage chance that they will get there,” he said.

https://www.nytimes.com/2018/06/05/technology/bitcoin-susquehanna.html

Tried to bold the best parts & corrected the error where the article claimed bitcoin would reach its cap in "2040"(2140 is the correct year).

Here is a stark contrast to claims of bitcoin being a "bubble", bitcoin being a "safe haven" for terrorists, criminals and money launderers, bitcoin being "created out of thin air with no intrinsic value" and other perhaps somewhat biased, negative portrayals commonly covered by the mainstream media.

This investment firm says they believe bitcoin will be around forever. It seems they're backing up their words by perhaps being the 1st big investment firm to deploy bitcoin and crypto currency investment services. Here is perhaps good news for long term bitcoin HODLers and perhaps a hint that bitcoin will make a comeback at some point in 2018.

[1714767689]

1714767689

[1714767689]

1714767689

[1714767689]

1714767689

[davis196]

It`s good to see more crypto investing projects being developed in the USA,however their method of keeping the private keys can be compromised.Bitcoin can be recognised as a security by the US authorities,but the BTC haters still have big influence and they won`t let it happen.

[Don Pedro Dinero]

It`s good to see more crypto investing projects being developed in the USA,however their method of keeping the private keys can be compromised.Bitcoin can be recognised as a security by the US authorities,but the BTC haters still have big influence and they won`t let it happen.

But I think the masses join the bitcoin world though such sites, where the site holds the keys, like coinbase. Only after, some of them when they learn more they will get a paper or hard wallet. But it is good news, as it will help mass adoption.

[qiwoman2]

I think slowly but surely bigger financial institutions will back Bitcoin and say top cryptocurrencies and start putting them in their portfolios. There are already hedge funds now specifically targeting Bitcoin and certain other cryptos hand picked for their clients and now more and more people are saying that everyone should have at least 1-5% of their portfolio in crypto assets. I hope more and more mainstream long term hodlers start coming into this space because we have way too many short term speculators for my liking.

[Twentyonepaylots]

I think slowly but surely bigger financial institutions will back Bitcoin and say top cryptocurrencies and start putting them in their portfolios. There are already hedge funds now specifically targeting Bitcoin and certain other cryptos hand picked for their clients and now more and more people are saying that everyone should have at least 1-5% of their portfolio in crypto assets. I hope more and more mainstream long term hodlers start coming into this space because we have way too many short term speculators for my liking.

 This is a good news to crypto currency digital transaction, Development such as this Business company opening new opportunity for Bitcoin investors, traders, is a welcome news. The growing interest of financial institution into Bitcoin transaction would increase the level of confidence of a lot more Bitcoin investors,traders, and the possible entry of new investors in the future trading market. It just show that the issue on regulation would be resolved soon, every talk is an opportunity for Bitcoin acceptance into the global market in the future.

[shulio]

I can not decide if it is good or bad. These new trading companies makes new money flow into crypto currency but they also makes the prices stabilize.

[drm]

“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” he said.

They seem to be in it for more than just the profit.

I can not decide if it is good or bad. These new trading companies makes new money flow into crypto currency but they also makes the prices stabilize.

Where is the bad in the points you are making?

[MrAntonius]

SAN FRANCISCO — While a number of large financial institutions have discussed trading Bitcoin, one firm has already begun doing it. Very quietly.

The financial firm, Susquehanna International Group in Bala Cynwyd, Pa., just outside Philadelphia, is one of the largest players in trading traditional investments like stocks, options and exchange traded funds, or E.T.F.s. Over the last two years, the privately owned company has also built up a trading desk of around a dozen people that buys and sells millions of dollars’ worth of Bitcoin and other virtual or cryptocurrencies in private deals.

Now the firm is opening trading to a small group of its 500 clients, with plans to expand.

The move is the latest sign that the virtual currency markets, which were once relegated to the fringes of the financial world, are being embraced by big, mainstream investors.

The parent company of the New York Stock Exchange, the Intercontinental Exchange, has been in talks about opening a subsidiary for cryptocurrency trading, and Goldman Sachs is on the verge of opening its own trading operation.

But Susquehanna, which has around 1,800 employees around the world, has a lot more money backing its trading desk — and a lot more ability to interact with clients — than the hedge funds and trading firms that have also been early participants in the virtual currency markets.

The arrival of big financial institutions has raised concerns among some Bitcoin aficionados, who worry that it will harden Bitcoin’s status as a speculative trading asset like gold and diminish hopes that it can be used in day-to-day transactions.

Not so, said Bart Smith, the head of the digital asset group at Susquehanna. The firm believes that Bitcoin and other cryptocurrencies inspired by it are likely to have a wide array of uses, but for now, he said, Bitcoin’s best bet is to challenge gold as a scarce commodity that can be moved around more easily.

The original Bitcoin software determined that only 21 million Bitcoin would ever be created. That cap isn’t expected to be hit until 2040(Hydrogen edit: the correct year is 2140***), and the limited number of tokens currently in circulation has made the online currency appealing as a commodity.

Mr. Smith said that he could also imagine Bitcoin, or some competitor, becoming a digital payment method for the internet — as Jack Dorsey, Twitter’s chief executive, recently predicted — but that he wasn’t too worried if that didn’t happen.

“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” he said.

Susquehanna first experimented with trading Bitcoin in 2014 after the investor twins Cameron and Tyler Winklevoss asked the firm about being involved with a Bitcoin E.T.F. that they had applied to regulators to create.

Regulators eventually denied that application. But Susquehanna kept its one Bitcoin trader on board, and then added a few more last year when the cryptocurrency markets took off.

The firm decided to step up its operation, and go out to clients, after seeing the success of Bitcoin futures contracts, which were introduced by exchanges in Chicago late last year and have been growing volume in recent months.

Susquehanna will trade futures, which are contracts tied to the future price of Bitcoin. It will also allow customers to buy and sell actual Bitcoin and a few other cryptocurrencies like Ether and Bitcoin Cash.

To make these available to customers, Susquehanna recently amended the broker dealer license that it has on file with regulators. That change will allow the company to trade cryptocurrencies that are labeled by regulators as securities. Regulators in the United States have recently indicated that many newly created virtual currencies — though not Bitcoin — should likely be categorized as securities and traded only by regulated entities.

Most of the cryptocurrency exchanges where Susquehanna trades are largely unregulated. Bloomberg recently reported that American authorities were investigating whether some traders were taking advantage of this to manipulate the price of Bitcoin by posting lots of trades that they didn’t intend to complete.

Mr. Smith said he had not seen clear evidence of manipulation, but cryptocurrency markets are still very immature compared with the other markets where Susquehanna trades, especially given the lack of regulations for many of the largest exchanges holding cryptocurrencies.

He said the single biggest problem for sophisticated investors was the security risk in holding virtual currencies. In other markets, Susquehanna doesn’t have actual custody of stocks or bonds.

Bitcoin was built so that users can hold and transfer their tokens with a password or private key that no one else knows. If the private key is compromised, a hacker can take the coins, and the owner has no way to get them back. That has led to big losses at several Bitcoin exchanges.

Susquehanna built its own systems for storing the cryptocurrencies it is holding for more than a day. To deter hackers, the private keys are kept in devices in an off-site facility that is not connected to the rest of the company’s computer systems.

“There were no financial services firms out there two years ago that were storing and moving large amounts of cryptocurrencies, so there is no road map,” he said.

Then there is the matter of trying to figure out on a daily basis what a single Bitcoin or Ether token should be worth.

There is still little agreement on what factors traders should take account of when deciding on a value for cryptocurrencies, given that many of the expected uses for digital tokens are still hypothetical. While Mr. Smith’s teams look at the technical and security specifications of the coins, it is much harder to answer the most important question: Will they be used as something other than a digital commodity?

“The value is: What do you think the best-case scenario of these different digital assets is in the future — and handicapping what is the percentage chance that they will get there,” he said.

https://www.nytimes.com/2018/06/05/technology/bitcoin-susquehanna.html

Tried to bold the best parts & corrected the error where the article claimed bitcoin would reach its cap in "2040"(2140 is the correct year).

Here is a stark contrast to claims of bitcoin being a "bubble", bitcoin being a "safe haven" for terrorists, criminals and money launderers, bitcoin being "created out of thin air with no intrinsic value" and other perhaps somewhat biased, negative portrayals commonly covered by the mainstream media.

This investment firm says they believe bitcoin will be around forever. It seems they're backing up their words by perhaps being the 1st big investment firm to deploy bitcoin and crypto currency investment services. Here is perhaps good news for long term bitcoin HODLers and perhaps a hint that bitcoin will make a comeback at some point in 2018.

Why we wonder. While countries cannot and do not know how to regulate bitcoin trading, others simply take and do create communities of investors who are interested in large profits. Well done That I can say. Very good.

[butka]

The rhetoric is changing. It takes nothing more than some solid common sense logic to see into the near future. These guys sense the eco-system is changing and are already paving the way for bolder moves in the future. I mean, it's obvious that bitcoin is becoming more and more like gold, a store of value with the advantage that it can easily change hands. And it is also obvious that crupto-currenceis are ideal to be used on the internet and will likely become the default payment method for online payments.

[shulio]

“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” he said.

They seem to be in it for more than just the profit.

I can not decide if it is good or bad. These new trading companies makes new money flow into crypto currency but they also makes the prices stabilize.

Where is the bad in the points you are making?

For me stable prices is bad. It will make trading less profitable. And the 100000 dollars price will be more far away.

[babaya]

“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” he said.

They seem to be in it for more than just the profit.

I can not decide if it is good or bad. These new trading companies makes new money flow into crypto currency but they also makes the prices stabilize.

Where is the bad in the points you are making?

For me stable prices is bad. It will make trading less profitable. And the 100000 dollars price will be more far away.

you right, no volatilty no gain that we can get.less opporunity in stable market.bitcoin become very interesting while move up and down wildly.there will make speculator come

[Gdra467]

It's about time the biggest players learned that bitcoin and blockchain are the hottest cake in in town in terms of digital assets. Everyone wants convenience and that is just what bitcoin is providing. These big institutions had better fused blockchain into their daily financial dealings.

[Kevondo]

I can not decide if it is good or bad. These new trading companies makes new money flow into crypto currency but they also makes the prices stabilize.

Of course this looks good for future benefits. The company is actually trying to expand the bitcoin technology and is attracting investors to invest in it. This is exactly a function the market does. Regulations also might prove good step to overcome the fear of scam in the crypto market and this security will also lead to lower risk associated with different crypto and coins.

[swissgang]

It is hard to know which one is actually ahead of others because they especially the wall street only speculate on bitcoin but they probably do more than speculation in the company.

[Tankdestroyer]

Here is perhaps good news for long term bitcoin HODLers and perhaps a hint that bitcoin will make a comeback at some point in 2018.

After this, I see many more investment firms following their move. This signals not just a comeback in 2018, but this also signals that bitcoin is nearing the start of its early mainstream phase. With institutional money and veteran finance investors coming into crypto space, I am sure there will be lesser manipulation in the next coming days, then after this phase, I think it will proceed to the phase where some countries who banned cryptos to reconsider their decision.

[magneto]

There should be a lot more firms like this one popping up in the future. We're seeing an strong inflow of institutional interest, and in my opinion, this interest will most likely continue to grow, and as regulations mature, will actually put these interests into actions.

Also, bitcoin will definitely be around/exist for as long as there is interest in it, regardless of what public perception of it may be.

The firm believes that Bitcoin and other cryptocurrencies inspired by it are likely to have a wide array of uses, but for now, he said, Bitcoin’s best bet is to challenge gold as a scarce commodity that can be moved around more easily.

This was the most interesting part of the article.

It does seem reasonable to suggest this, as bitcoin is essentially a better version of gold with all the store of value properties whilst being more convenient, however, it can definitely be utilised in a multitude of ways that may not necessarily mean fulfilling the previous roles of gold. For example, bitcoin being the the currency of the internet in the future that they mentioned could definitely be a possibility.

[pey]

Relatively little companies, banks can take advantage of blockchain technology to become ahead of other ones in the industry. This is really good opportunity that will not come again.

[CryptoManiac3]

Everytime I read something like this it makes me wonder how people can still be calling cryptocurrencies a scam. Lol, if this isn't proof then I don't know what is.

[kive2k]

Wow! this is just great news, now I will follow this company and read the news every day. I sincerely wish them good luck!

[r32godzilla]

I would say that such positive moves by big firms would add more credibility to bitcoin and it would increase the volume of users all over the world.On one side,big economic giants like gates and buffet discouraging use of bitcoin and on the other side,big firms entering crypto market.W e would have to wait a little more to see bitcoin overthrowing all the critics remarks and marching towards success.