Why Young Wall Street Wolves Invest in Crypto, Not Stocks

Earlier this year, Goldman Sachs conducted a comprehensive survey of interns on a variety of topics, from TikTok usage to attitudes towards the climate crisis.…

The results stunned the initiators of the study. 21% of respondents suddenly gave a positive answer to the question “have you ever invested in cryptocurrencies?” Moreover, 34% believe that virtual assets should be available for investment on a par with traditional ones.

Wall Street on cryptocurrencies: investing cannot be ignored

The incredibly curious results speak volumes. After all, it has long been known that Wall Street lives by fairly strict laws: their implementation is monitored, and violation, to put it mildly, is not encouraged. It should be noted, however, that internal policies differ from company to company.

However, traders and employees who work with clients’ money are more limited in freedom of action than their private counterparts. For example, even transactions approved by management can be frozen for a month, so that the employee is not distracted by day trading, and more attention is paid to finding promising projects for investment.

More recently, financial institutions have waged an active war with clerks who used messengers with message encryption. Now they are faced with a new generation of future tycoons of the financial world, and this new generation chooses to invest in … cryptocurrency, and not in the instruments of the traditional stock market.

At the same time, these same companies themselves succumbed to the now fashionable “madness” on the basis of virtual assets and are rapidly seeking to integrate with the cryptocurrency industry. So, at the end of November 2021 Citigroup appointed the head of the new department for work with digital currencies.

In the meantime, traditional business is frantically thinking about what to do with popular investment trends and how to catch the departing train, still young, but already dreaming of the status of “wolves of Wall Street”, interns make substantial money on cryptocurrency.

At the same time, the banks serving the accounts of our heroes prefer to take a wait-and-see attitude, without making any special efforts in the issue of introducing restrictions on operations with cryptocurrency. On the contrary, they do not prevent employees from gaining valuable experience in working with digital coins, because it will be worth its weight in gold for the employer if the regulator approves the list of services provided by the bank extended by virtual assets. Moreover, financial and credit institutions do not have an effective tool for monitoring transactions with cryptocurrencies.

What did future business sharks find in virtual assets?

Reed Alexander and Alex Morrell are typical representatives of a young cohort of financial geniuses. They agreed to tell Insider about their crypto investing experience. And, of course, what the compliance control departments of banking institutions think about it.

First of all, the interest of young financiers in cryptocurrencies was aroused by several cases of impressive earnings of senior colleagues on transactions with virtual assets. Reid and Alex wondered how this practice would fit with Wall Street’s unwritten rules.

And they were surprised to find that only a small number of companies have any digital asset policy. Most continue to puzzle over how to control this area.

To keep the bosses from getting excited, employees use digital wallets instead of traditional brokerage accounts for cryptocurrency transactions. This prevents employers from drawing undue attention to their investments. However, it is unclear how long this window of opportunity will remain open.

Here’s what Joe Schifano, Director of Market Regulation at Eventus Systems, has to say about the matter: “There is a curious problem of finding a compromise between the immutable internal rule of the company, which says – “you must tell management what you trade”, and the freedom of the crypto industry, in which the right to privacy is paramount.“.

Young people of today, who have not yet had time to feel the impact of the strict requirements of financial regulators, do not want to get used to the idea that they are obliged to tell their bosses what they do privately.

Another young financial analyst from Chicago named Seth regularly invests in cryptocurrency for almost half of his monthly earnings. He prefers 3 assets: Bitcoin, Ethereum and Solana. Seth says that in October last year, together with 15 friends, he liquidated all positions in stocks, and invested the released funds in virtual currencies.

As a result, in 12 months, his crypto portfolio grew to $ 177,000 from the initial $ 25,000 received from the sale of shares, and the $ 4,000 that he invested monthly. His investment in cryptocurrency brought in 242% profit in 12 months. At the same time, Seth is not too worried about a potential decrease in market activity: “I invest in the long term,” he says.

What do employers think?

Companies tend to follow their internal policies carefully, including with regard to employee investment activities. Insider decided to find out how Wall Street’s oldest financial institutions feel about the cryptocurrency craze of their clerks.

V Bank of america stated that they do not put forward any special requirements regarding investments in virtual assets. JPMorgan likewise, it does not prohibit and does not require an employee to obtain permission to invest their own funds in any assets.

But in Goldman sachs and Morgan stanley went even further and formed internal rules related only to operations with cryptocurrency. In the first company, most employees are free to invest in virtual coins without restrictions. The exception is those responsible for the development and release of new cryptocurrency products, such as, for example, bitcoin futures.

V Morgan stanley require employees to report on cryptocurrency transactions only when they use external brokerage accounts. When working with a regular exchange wallet, there are no obligations. However, a representative of the company’s top management said that as crypto services are integrated into the bank’s profile, in the future, employees may be required to have a greater degree of information disclosure.

V UBS traders are not allowed to work with crypto derivatives such as bitcoin ETFs. At the same time, there are no restrictions directly on investments in virtual coins.

The oldest US banks still cling to their usual way of things, without enthusiasm perceiving the crypto-attraction of the younger generation, considering it a risk and self-indulgence.

There are exceptions, though. So, the senior manager Goldman sachs hit the front pages of the May newspapers after leaving the bank. Many major publications called the huge fortune that Aziz McMahon earned on private investment in cryptocurrency as the main reason for his voluntary resignation.

True, the media disagree about which particular project helped him earn millions. For example, The Guardian reports that it was Dogecoin, while CNBC believes it was Ethereum. The top manager himself, who worked in the company for 14 years only in the last position, refused to disclose the details of the success.

Therefore, it is not surprising that the rising generation of Wall Street wolves, with such examples in front of their eyes, is eager to use every opportunity to create their own success story. Even with the tacit disapproval of the employer.