Storied and much-maligned New York-based multinational investment bank and financial services company Goldman Sachs is launching into the bitcoin market by establishing what is thought to be Wall Street’s first bitcoin trading desk.
With Its Toes Already Dipped In, the Bank Now Wants to Take the Plunge
The company has already been clearing trades for customers investing in futures on the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE). But it now plans to trade bitcoin futures using its own money on its clients’ behalf, before then going on to establish a non-deliverable forward bitcoin contract product to offer its clients.
The move comes as interest in bitcoin and the cryptocurrency market generally has grown among hedge funds and other institutional investors. Goldman is set to join fintech company Square and the two Chicago-based commodity exchanges in offering products tied to bitcoin.
Goldman Sachs Lends Its Reputation to Bitcoin’s Image – A Good Thing or a Bad Thing?
Rana Yared is one of the Goldman Sachs executives charged with overseeing the company’s bitcoin trading desk. On the perceived risks associated with trading in derivatives tied to such a volatile asset, she told reporters:
“It is just a heightened risk that we need to be extra aware of here.”
Goldman Sachs will not directly trade bitcoin without a green light from regulators, which many concede is some time away. But the much-vaunted Wall Street institution’s interest in bitcoin will certainly enhance the image of the cryptocurrency market among large financial services industry incumbents.
What Goldman’s entrance into the market will mean for bitcoin’s appeal among bitcoin loyalists and early adopters is a different story. The giant investment bank was widely criticized for misleading its investors about its collateralized debt obligation (CDO) products and profiting from the collapse of the U.S. mortgage market during the financial crisis of 2007-2008.
The SEC alleged the firm knew the CDOs were linked to mortgage debts that were likely to fall into default, and took positions against them. The firm settled charges of securities fraud in a lawsuit filed by the SEC with a whopping $550 million USD payout. In the wake of the crisis, the bank had received a taxpayer bailout of $10 billion in the Troubled Asset Relief Program (TARP).
Wall Street Heavyweights Can No Longer Resist the Appeal of Bitcoin
Jamie Dimon, chief executive of Goldman rival JPMorgan Chase & Co, famously labeled bitcoin as a “fraud”. Highly regarded investor Warren Buffett continues to belittle cryptocurrencies, once calling bitcoin a “mirage”. Many among the Wall Street elite continue to believe bitcoin is a bubble to be avoided.
Goldman Sachs has made a determination that bitcoin is not a fraud or a currency, but a valuable commodity with limited supply, like gold. Their interest in bitcoin is being driven by increasing levels of interest among their clients and their focus on technological sophistication since the Great Recession they helped cause. With the Wall Street mainstay, founded in 1869, now taking the plunge, it may be difficult for their peers to continue to avoid digital currencies.
Have your say. Do you welcome Goldman Sachs’ entry into the cryptocurrency market?
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