Wall Street Banks Warm To Crypto As Bitcoin Booms

Bitcoin’s extraordinary rise past the $100,000 mark in 2024 has forced a dramatic rethink on Wall Street. Once seen as speculative and untouchable, cryptocurrency is now drawing the attention of major investment banks. This shift reflects a broader acceptance of crypto as it edges closer to mainstream finance, but it’s also a calculated gamble in a high-risk, high-reward frontier.

For years, big banks kept crypto at arm’s length, wary of its volatility and dubious reputation. High-profile critics like JPMorgan’s Jamie Dimon famously dismissed Bitcoin as a “fraud” and a “Ponzi scheme.” Regulatory fears only added to the chill, leaving crypto-related deals to smaller, specialist firms. But the ground has shifted, and Wall Street is following suit.

The Tipping Point

The Securities and Exchange Commission’s (SEC) approval of Bitcoin exchange-traded funds in January 2024 marked a key moment. This regulatory green light has opened doors that were previously shut. Combined with the return of Donald Trump to the White House—widely expected to herald a more crypto-friendly SEC—major banks are reconsidering their approach to the sector.

This year, firms like Barclays and Citigroup have moved quickly to capitalise on the booming market. They led a series of convertible bond offerings for MicroStrategy, a prominent Bitcoin investor. Goldman Sachs has raised funds for Applied Digital, which operates data centres for Bitcoin miners. Even JPMorgan, once a vocal critic, has underwritten deals for mining and infrastructure companies such as Core Scientific and Mara.

A Calculated Gamble

For Wall Street, embracing crypto is not a wholehearted endorsement but a balancing act. The sector’s potential is undeniable, but so are the risks. Each deal is weighed against three key considerations: risk, reward, and reputation.

Reputational risk remains a sticking point for many. Some crypto players come with baggage, and none more so than MicroStrategy and its co-founder Michael Saylor. The company has been a vocal advocate for Bitcoin but has also faced legal challenges, including a settlement over accounting fraud in 2000 and a tax fraud lawsuit in 2024. For Barclays and Citigroup, these issues likely raised concerns, but the promise of hefty fees proved persuasive.

This tension mirrors the rise of special-purpose acquisition companies (SPACs). Initially dismissed as gimmicks, SPACs became wildly popular during the 2019–2021 boom before many banks pulled back, citing reputational risks. Crypto capital-raising feels similar—a lucrative opportunity on a volatile frontier.

The Lure of Big Fees

The financial rewards in crypto capital markets are substantial. In 2024 alone, over $13 billion in crypto-related convertible bonds were issued, most of it in the final quarter. This activity generated fees estimated at $200 million, according to industry analysts.

MicroStrategy’s $21 billion equity offering underscores the potential for revenue. Banks handling the sale earned fees of 2%, making the deal a lucrative proposition despite the risks.

Yet even with such rewards on the table, caution persists. Investment banks have long shied away from sectors like adult entertainment or cannabis—not because of legality, but because of optics. Banking is as much about perception as profit, and no institution wants to risk its reputation unnecessarily.

However, as more banks enter the crypto space, the pressure to follow grows. Moving as a group mitigates individual risk; if a deal falters, no single bank takes the full hit. Competitive instincts also play a role—no banker wants to be the one explaining a missed opportunity to their superiors.

Crypto Moves to the Mainstream

Bitcoin’s meteoric rise has forced the hand of Wall Street’s biggest players. What was once dismissed as a fringe phenomenon is now seen as too significant to ignore. The evolving role of crypto offers a glimpse into how banks weigh risk and reward in a fast-changing financial landscape.

This shift is less about an endorsement of crypto’s long-term stability and more about adapting to a market that’s growing too large to overlook. Each deal pushes the boundaries of what’s considered respectable, forcing institutions to continually reassess their approach.

As the sector grows, so do the stakes. Wall Street’s gradual embrace of crypto reflects a recognition that the rules of finance are changing. Whether this trend will prove sustainable or end in regret remains to be seen, but one thing is clear: the era of banks sitting on the sidelines of crypto is over.