Crypto headlines usually focus on price swings, scandals and speculation. But one of the clearest signs of blockchain’s long-term relevance may be happening somewhere far less exciting: Wall Street’s repo market.
Is this really the most boring part of the economy?
The media likes to focus on exciting stories. They like to focus on price movement, scandals, speculation… Anything to get people emotional, excited, and glued to the screen.
But successful investors, including successful institutional investors, don’t make emotional investment decisions. They make rational, often boring, decisions with their investments.
They’re there to reach their investing goals, after all, not get anyone else excited and watching screens like people watching a football game that they’ve bet on.
So, even in boring parts of the economy, you’ll see an emphasis on speed… even if it’s not exciting otherwise.
Even if what is happening isn’t exciting, institutional investors keep their interest in a particular boring area because, even if it is dull to watch, it is huge.
Now, if you haven’t already guessed, I’m talking about what is commonly called the “repo” market. (No, it’s not a “repo man” picking up cars from deadbeats – that’s a much more exciting, and much smaller, sector.)
In this case, repo stands for repurchase agreement, and it’s huge. The Brookings Institute defines it as:
A repurchase agreement (repo) is a short-term secured loan: one party sells securities to another and agrees to repurchase those securities later at a higher price. The securities serve as collateral.
It’s a lot like the “commercial paper” market we all learned about in the aftermath of the Great Financial Crisis (remember that?) But the repo market is secured by collateral, whereas commercial paper is usually unsecured. Both are major parts of the short-term funding system that keeps corporations in business.
The reason we’re talking about it, though, is just how much activity happens in this sector. According to Anna Irrera with Bloomberg, the repo market is “nearly $13 trillion.”
So not small change! Wall Street cares about big money. Repos, after all, provide quick, short-term funding for settlements, trades, loans and other activities. It’s what keeps money and trades moving smoothly.
And when you’re talking about short-term, quick loans, speed is one of the most important factors to get the transaction done when the money is needed.
How Wall Street uses blockchain in the repo market
Because speed is so important in repos, of course Wall Street is interested in anything that can speed up the funds transfer process to move funds from one hand to another.
Which is exactly why JPMorgan Chase & Co. and others have done the work to put blockchain technology to work now in repos. In fact, blockchain funds transfers are, according to the global head of digital markets with JPMorgan, already in daily use.
This isn’t in the future. It’s already happening.
And as I’ve mentioned before, money transfers using blockchain are both faster (there’s that speed thing again) and cheaper to do than how the transactions were processed previously.
This speed and money savings allows deals to be completed more quickly, meaning that everyone gets their money quicker (making everyone happy) and freeing up time to make more deals.
And the cost savings mean that they have more capital available for making additional deals.
Remember, this isn’t an experiment. This is being used everyday now.
Which is why it is interesting to people considering diversifying into cryptocurrencies. Blockchain tech is already in daily use already by major institutional investors such as the biggest bank in the world. They aren’t considering using blockchain. They aren’t rejecting it. They are using it already. Wall Street’s use of blockchain undermines the skeptic’s claim that crypto and its related technologies are impractical. Or are going away.
And while speculators and gamblers fixate on price movements, serious long-term investors (including institutions) are seeing the benefits of the future of money today.
Think about it! If blockchain were only useful for speculation, Wall Street wouldn’t dare integrate it into the mission-critical repo market. Instead, blockchain is being used in one of the least glamorous but most essential parts of the financial system.
The fact that major institutions are using blockchain in repo does not mean the financial system has magically become risk-free. But it does suggest Wall Street sees blockchain as an ideal solution where speed, collateral movement and trust matter most.
What does that mean for you? As most of us are saving for retirement, it means we shouldn’t pretend every crypto headline matters. (Most don’t.)
The better question is whether digital assets and blockchain infrastructure are becoming too important for long-term investors to disregard.
Listen: I’m not saying “buy crypto because JP Morgan uses blockchain.” Here’s what I want you to understand: Major financial institutions are proving the usefulness of blockchain itself. That strengthens the long-term case that digital assets are becoming part of our everyday financial architecture. That’s the real story here.
A growing number of long-term investors have decided that they simply can’t afford ignore the sector any longer.
I invite you to learn more and decide whether you’d like to join them. To learn more about diversifying into crypto, get our free Essential Guide to Digital IRAs. If you’ve done your due diligence and you’re ready to diversify into crypto right now, you can open your own BitIRA account online in just a few minutes.
Taking the next step today may bring you a lifetime of benefits.
