A bitcoin logo is displayed at the Bitcoin Centre in New York City. Wall Street bankers and traders are leaving high-paying jobs to join bitcoin start-ups, while big firms hire in-house to get their arms around bitcoin and the related  ‘blockchain’ technology.

Reuters/New York

Armed with a doctorate in financial engineering, 34-year-old Timo Schlaefer was on his way to a promising career at Goldman Sachs in London. Previously with the bank’s mergers and acquisitions team, he became an executive director of credit quantitative modelling at Goldman, where quants like Schlaefer are highly valued.
In February he gave that up, and launched a company called Crypto Facilities, a bitcoin derivatives trading platform, which now has six employees. For now, the platform trades bitcoin forwards, which are directly linked to the price of bitcoin, but it’s also developing other digital currency derivative products.
“This is uncharted territory,” said Schlaefer. “It’s an exciting opportunity to participate in a new area of technology that has massive potential.” Bitcoin is a virtual or online currency created through a “mining” process where a computer’s resources are used to perform millions of calculations. Once mined, bitcoins can be stored in an online wallet, traded in an online exchange, or used to buy goods and services.
Once the province of small-time investors driven by their distrust of government-backed currencies, now Wall Street bankers and traders are leaving high-paying jobs to join bitcoin start-ups, while big firms hire in-house to get their arms around bitcoin and the related ‘blockchain’ technology.
“A lot of people are entering the bitcoin space as the sector has reached an overall level of funding that’s hard to ignore,” said Jaron Lukasiewicz, founder and chief executive officer at New York-based bitcoin exchange Coinsetter. Lukasiewicz, 29, moved to the bitcoin world in late 2012, having left behind a six-figure salary in private equity at The CapStreet Group in New York.
Bitcoin is not backed by a government and its value fluctuates. On Thursday, it was trading at $278, making the value of outstanding bitcoin worth about $4bn. It has had a volatile history, with a rapid rally in 2013 that boosted its value to more than $1,150 per bitcoin at one point.
Right now, Crypto Facilities’ Schlaefer probably won’t make anywhere near the kind of money that he would potentially earn at Goldman. But it’s less about the compensation for Schlaefer and more about being part of the growth in bitcoin and its underlying technology, the blockchain.
The blockchain - a ledger or list of all of a digital currency’s transactions - is viewed as bitcoin’s main technological innovation, allowing users to make payments anonymously, instantly, and without government regulation.
Software engineers have started developing multiple applications for the blockchain, including a land title record system in Honduras to the clearing of trades in financial markets.
Meanwhile, Wall Street firms are doing their own hiring in the cryptocurrency realm. In June, online bitcoin job ads surged to a record high of 306, according to data from Wanted Analytics, with demand coming from banks such as Capital One and tech companies such as Intel and Amazon. In previous months, Citigroup and TD Canada Trust posted bitcoin job ads as well. For 31-year-old Paul Chou, founder and chief executive officer of Ledger X, an institutional trading and clearing platform for bitcoin options, moving into the digital currency space represents what he hopes results in lucrative profits down the road. But there are other reasons for his shift.
LedgerX is awaiting regulatory approval from the Commodity Futures Trading Commission to trade and clear options on bitcoin. Chou said the firm hopes to operate the first regulated exchange and clearinghouse to list and clear fully-collateralized, physically-settled bitcoin options for the institutional market.
“I took a very large salary pay cut to do this, in return for equity in a start-up that can be worth a lot someday,” Chou said.
Before LedgerX, Chou worked at Goldman Sachs in New York as a quant equity trader after graduating from the Massachusetts Institute of Technology with degrees in computer science and mathematics.