In a potentially spectacular moment of irony, the latest rumor from the top of the global financial food chain is showing that Goldman Sachs is considering trading in BTC. This comes only weeks after one of its leaders, Jamie Dimon, stated that the entire concept of bitcoin is fraudulent. He went even further by declaring that anyone employed under would be drastically penalized if they decided to venture into this market.
Now, the Wall Street Journal has reported that the company is looking to create a trading outfit that would specialize in cryptocurrencies. Lloyd Blankfein, the CEO of Goldman Sachs has tweeted how he is still undecided on BTC as a currency, which is a position clearly different than that of Dimon. Naturally, many have already noted that no one has to be a “believer” in cryptocurrency to see and use its features for their profits or other end-goal.
Right now, Goldman Sachs does to research that covers bitcoin as a form of an asset. But, a trading outfit would be something on a completely new level. Here are the key elements of the story and why does it matter for both the digital currency markets and the Wall Street financial industry.
The New Outfits
If the rumors end up being true, it would only show another big move that is slowly bringing bitcoin domain and the Wall Street close together. Even if it is not, there are plenty of cases in which financial firms working in the traditional domain began experimenting with their potential on the crypto markets.
One of these is the Fidelity Investments Company that has been developing a bitcoin project that was recently involved in a starting phases of a partnership with CoinBase. Its main focus is allowing users who hold cryptocurrencies to keep track of it along with their traditional assets.
But, if the Goldman Sachs really does equip an outfit for the cryptocurrency trading, it would be the first of its kind in the Wall Street arena. But, the same unverified reports claim that the company is more than ready to scrap the entire project if it does not fully integrate with all of its internal needs and demands. Still, there is a strong sense that the upper echelons of the financial world are beginning to take notice of the crypto market and ways it can earn them money.
However, it is important to underline that this news is still a rumor. In fact, some have hypothesized that the rumor was started to move the price of BTC after a slow period and that is has nothing to do with the real situation inside of the company.
The trading desk that could be established by the company is completely in line with its overall approach to any form of trading. So far, Goldman Sachs has preferred the high-risk, high-return method of trading and crypto markets fit perfectly into this notion, a lot more in fact than the company’s entrance into the retail banking.
Bitcoin, which is used for everything from online purchases to BTC online betting, is a clear example of a dynamic market which can provide its traders with huge daily variations in price. Still, the recent data show that the market volatility is at its five-year low, an investment bank would be a great chance for offsetting the recent slump in trading.
Right now, the second quarter trading revenues have fallen by more than 40% on a year-over-year basis. But, if this company decided to delve in, other giants of Wall Street would undoubtedly follow. Just recently, the CEO of Morgan Stanley stated that bitcoin in particular was more than a simple fad.
The Goldman Sachs Effect
The potential of this project is both huge and goes well beyond any bottom line of the same company. The first domain in which the impact would be felt is the bitcoin’s trading volumes, which would grow as the institutional funds begin to pour into the market. At the same time, this turn of events would push the volatility of the asset even further, making its risk-return balance more off-balance.
This, in turn, would attract even more institutional funds that are risk-seeking and the whole market could end up in a really unstable position. It could also, on the other hand, boost the trading of bitcoin derivatives. Earlier in 2017, the Commodity Futures Trading Commission in the US authorized the LedgerX. This is the first fully regulated BTC derivative exchange and also clearinghouse.
This year, the Board Options Exchange of Chicago is seeking to launch their bitcoin future contracts. All of this is fueled by the heightened demand for all manner of hedging instruments, so most likely other would emerge as well.
Being that hedging takes down the need of traders to churn their positions (losses at one position are made up on another) more liquid derivative could be able to slightly calm down any BTC volatility. This would hopefully start the process of snowballing the effect on liquidity.
A Brand New Plan
Finally, the last effect could be the use of BTC as a form of a competitive tool. This would lead to a corporation and their strategies using bitcoin services as a means of a differentiating factor which would show business as being more trader-friendly and forward-thinking than their traditional counterparts. Already cryptocurrencies, like eSports are similar ventures, as seen as very advanced by ordinary individuals, but also by companies.
This setup is already evident in Japan where a few large financial companies have made investments in BTC exchanges, along with SBI working on a possibility of opening their own. Norway’s central bank is working on an in-house digital currency while providing their clients with cryptocurrency services.
Because of all of this, it is easy to imagine Goldman Sachs going away from this possibility or embracing it and starting to work with BTC trading procedures. However, in any case, the chance for making a profit is substantially high and if this particular company does not take this opportunity, others will go for it. As the markets stand now, the first big entity from Wall Street to make that move will definitely end up as a winner, either immediately or in the long run.