- August 24, 2022
Wall Street doesn’t understand Bitcoin, and here are the reasons
John Haar, who was a member of the Asset Management division of Goldman Sachs for 13 years, explained in a recent article the reasons why members of traditional financial organizations object or deny the potential of bitcoin as a global currency. Haar concludes that the opposition of these to bitcoin comes from their lack of understanding of this asset.
Haar, who currently serves as director of Private Client Services at the bitcoin brokerage firm Swan Private, published last August 15 on the blog of that firm the article “How traditional finance perceives bitcoin”. In this, Haar exposes the experiences lived in his interactions with members of traditional finance around bitcoin.
Bitcoin triggered the conceptual discussion about money
While Haar argues that Bitcoin comprises several disciplines, he highlights two main elements for its understanding: understanding what solid money is (sound money in English), and understand how Bitcoin can succeed as a solid money. “My experience suggests that people in traditional finance rarely get to the second element. This happens for a variety of reasons.”
The paper argues that the basic questions such as, “What is money?”or “what is solid money?”, are not addressed by financial literacy. Despite their importance, these elementary questions are taken for granted, and instead universities concentrate on teaching “pre-packaged” economic theories to their students, Haar notes. Bitcoin has contributed to bringing these topics into discussion, the research claims.
The same goes for the term “fiat money,” the document argues. “Virtually no one in traditional finance even knew the term existed before 2010. To the extent that these now know the term, I think it can be attributed to the Bitcoin movement. (Although, of course, credit for the term goes to the Austrian school of economics, before that)”.
Reasons why Bitcoin is not supported by traditional finance
The analysis mentions six reasons why there is so little support for Bitcoin in the traditional finance sector. First of all, the sector does not understand the history and fundamentals of money. Traditional finance, on the other hand, spends little or no time researching Bitcoin and simply repeats the objections they see in the media.
“There is a conditioning towards the idea that centralized planning, both monetary and fiscal, is necessary for the growth and stability of the economy,” the document says, stating another of the reasons. To this is added the predominance of consensus followers over independent thinkers, in the traditional financial sector.
The dominant point of view in the sector is focused on developed countries that have not experienced in recent times a deep monetary crisis, nor a totalitarian regime. Finally, traditional finance wants to keep the current system working, in which saving is not an option and money must be invested, the publication points out.
The author highlights that it is not surprising the fact that when considering the adoption of bitcoin by countries, the vast majority of the top 20 are developing countries, as can be seen in the previous table. In these, the effects of monetary devaluation, a product of high inflation, are experienced on a daily basis. There are also capital controls and confiscations by the government.
“After many conversations, I can say that if there are people in traditional finance who have a well-researched stance on why Bitcoin is not a good form of money or why Bitcoin would not be successful, I could not find them,” Haar states in the conclusions of his essay.