Amid Bitcoin Uncertainty, ‘the Smart Money Knows That Crypto Is Not Ready’

SAN FRANCISCO — Paul Chou was among the many many Bitcoin aficionados who thought huge Wall Street establishments have been about to grow to be heavy hitters within the cryptocurrency markets.

Mr. Chou got here from a type of establishments, Goldman Sachs, and created a cryptocurrency trade, LedgerX, that may cater to huge buyers with subtle monetary contracts.

Now, within the wake of final 12 months’s Bitcoin crash, Mr. Chou is being pressured to confront how few of the massive finance corporations acted on their cryptocurrency plans.

“It was definitely part of the original plan that institutions would be a big part of this market,” he stated. “We were wrong.”

Some cryptocurrency enthusiasts had hoped that the entrance of Wall Street institutions would give them legitimacy with traditional investors. But their struggles — and waning interest — illustrate the difficulty in bringing Bitcoin from the fringes of the internet into the mainstream financial world.

Regulators have not approved investment products tied to Bitcoin because of the likelihood that prices are being manipulated. But exchanges where investors can bet on the price movement of Bitcoin through futures contracts, without having to hold Bitcoins, have gained approval.

The Chicago Mercantile Exchange, or C.M.E. has introduced a Bitcoin futures contract that has gained moderate traction with traders. Still, the market has been small enough that the C.M.E.’s competitor, the Chicago Board Options Exchange, said recently that it would stop issuing its own Bitcoin futures contract.

Even if the authorities are able to get comfortable with the security arrangements at Bitcoin exchanges, there is the question of what application Bitcoin and other digital tokens might have outside of speculation.

Many Bitcoin enthusiasts have argued that the original cryptocurrency is useful as a place to store value outside the control of any government or institution, as if it were a digital version of gold. But that narrative has been tested as the value of Bitcoin has bounced around. And other applications for Bitcoin, like using it to pay for things online, have not taken off.

“I think it will be years and years before it will be ready for nonspeculative use cases,” Mr. Murray said. “Until now, it’s just been people buying it and hoping it’s going to go up. I think that’s not going to end for three or four years.”

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