Bitcoin taps young talent from Wall Street financial analysts and traders

Bitcoin is gaining ground at banks and financial trading firms, while a wave of young finance professionals are abandoning traditional careers to start their own virtual currency businesses, Reuters reported, as it moves away from being strictly a retail investor seeking an alternative to government-backed currencies.

Jason Lukasiewicz, 29, entered the Bitcoin space in late 2012 after leaving his six-figure job at CapStreet Private Equity Group in New York. He is the founder and CEO of Coinsetter, a New York-based Bitcoin exchange.

Bitcoin Funding: Hard to Ignore

“As Bitcoin has reached a level where the overall level of funding is hard to ignore, a large number of people are entering the industry,” Lukasiewicz said.

Timo Schlaefer, 34, a PhD in financial engineering, works at Goldman Sachs in London. After leaving his job on the bank’s mergers and acquisitions team, he became executive director of quantitative modeling at Goldman Sachs.

In February, he quit his promising executive director position to start Crypto Facilities Ltd, a bitcoin derivatives trading platform. The platform trades forward bitcoins, making the price of bitcoin directly tied to it. It is also developing derivatives for other digital currencies. The company now has six employees.

'Uncharted territory'

“This is uncharted territory,” Schlaefer said. “It’s exciting to be entering a new technology field with huge potential.”

Schlaefer gave up the salary he could earn in the short term at Goldman Sachs. For him, he cares less about the salary and more about the development of Bitcoin and its underlying blockchain technology.

Meanwhile, many Wall Street firms continue to invest in virtual currencies. According to a report released by Wanted Analytics, the number of online Bitcoin job ads surged and broke a record in June, reaching 306.

Banks such as Capital One and technology companies such as Intel and Amazon have posted job ads on the site. In the past few months, Citigroup and TD Canada Trust have also posted online bitcoin job ads.

Paul Chou, 31, quit his job as a quantitative equity trader at Goldman Sachs in New York to pursue bitcoin after graduating from MIT with a degree in computer science and mathematics.

Paul, founder and CEO of Ledger X, a bitcoin trading and clearing platform, is awaiting approval from the Commodity Futures Trading Commission (CFTC) to trade and clear bitcoin options.

He said: "I took a big pay cut after the career change, but one day, in return for the equity startup, what I have done will be worth a fortune."

He said that he had been in business for a longer time, constantly refining his ideas and strategies and thinking about which areas to focus on.

“The expertise, relationships and career equity I’ve built are things I couldn’t have done at Goldman,” Paul said. He added, “As a former trader, I’m glad I made that trade-off at this stage in my career.”

These businesses face risks, and not all efforts will be successful.

The US Bitcoin market Buttercoin closed down in April after raising $1.3 million. Bitcoin exchange MyCoin closed down in February 2015, leaving about 3,000 investors penniless.

Mt. Gox, which once dominated bitcoin trading, shut down its exchange without warning last February and filed for bankruptcy, leaving investors owing about $500 million.

Bitcoin investment growth

According to CB Insights, in the first half of 2015, investments in bitcoin companies totaled $375.4 million, up from $339.4 million in 2014. Venture capital funding for bitcoin startups in 2014 increased by about 280% from 2013.

The number of Bitcoin startups has increased by more than 80% over the past year.

According to Angel List, a company that tracks companies that have raised money from angel investors, there were 814 cryptocurrency startups at the end of July, compared with 444 the previous year.

San Francisco-based Rick Henri Chan, chief operating officer of Airbitz, a digital wallet platform, claims that some traders have found better opportunities when banks delay compensation and add clauses that give them the power to limit bonuses.

Chan, 47, works for Deutsche Bank as head of over-the-counter derivatives technology in Japan.

He was a trader at UBS and Morgan Stanley before entering the bitcoin space three years ago. He was paid less at Deutsche and now works longer hours.

“What we’re doing at Airbitz is incredibly meaningful and I think our company will thrive in the future,” he said.