Recent reports have revealed that Goldman Sachs plans to relaunch its crypto trading operation by mid-March. The banking giant had previously shuttered its cryptocurrency trading desk three years ago in 2018 after the price of bitcoin crashed by over 65% between the 6th of January and the 6th of February.
Despite having made a few big hires at the time, the bank abandoned its cryptocurrency plans before the end of 2018. Reportedly its reason for deciding not to proceed was not only because of the crash, but also due to regulatory concerns.
Since then Goldman Sachs has not shown any interest in revisiting cryptocurrency trading – up until January this year when reports surfaced that it was considering re-entering the industry. It appears that those reports were accurate, and the bank is truly poised to relaunch its crypto trading operation.
What to Expect
According to a person familiar with the matter, Goldman Sachs’ crypto trading operation will begin by dealing in bitcoin futures. It will also trade non-deliverable forwards – allowing clients to speculate on the future price of bitcoin.
The same source also has reported that Goldman Sachs’ cryptocurrency team will be part of its Global Markets segment that is its largest division in terms of both assets and revenue. The cryptocurrency desk will initially act as a market maker and will buy and sell securities on behalf of clients, while not actively managing cryptocurrencies itself.
If all goes well, the cryptocurrency desk will be part of a broader foray into digital assets. In fact Goldman Sachs is already said to be looking into the potential for a bitcoin exchange traded fund and is exploring digital asset custody.
It should be noted that at this time there is no indication as to when Goldman Sachs will stage its bitcoin exchange traded fund. It is currently said to be merely exploring the option and seeking information.
Growing Interest from Mainstream Institutions
Although Goldman Sachs renewed interest in cryptocurrency may appear to be a bit abrupt, it is by no means surprising. Ever since the 2018 crash the market structure for cryptocurrencies has matured and more and more financial institutions have expressed interest in bitcoin and have begun their own cryptocurrency operations.
Some of the established financial institutions that are offering cryptocurrency-related products and services include CME Group Inc., Intercontinental Exchange Inc., JP Morgan Chase, and Fidelity Investment.
More recently, several prominent companies have come out in favor of cryptocurrencies and endorsed them. For example in the last few months Tesla Inc. bought $1.5 billion worth of bitcoin, while BNY Mellon announced a cryptocurrency custody service in partnership with Fireblocks.
Suffice to say, Goldman Sachs move to relaunch its crypto trading desk is in line with the current sentiment surrounding cryptocurrencies. Many financial institutions are starting to view cryptocurrency as a hedge against inflation during this period when governments and central banks are releasing stimulus packages.
Matter of fact Fidelity Investment indicated as much in a statement made recently where they compared it to gold.
Bitcoin Gains Momentum
On the heels of news that Goldman Sachs will be relaunching its crypto trading operations, bitcoin has definitely gained momentum. It ended up topping the $51,500 level just over a day after the announcement.
However despite the fact that it has been steadily rising over the last week ever since it hit a low of $43,343 – it still hasn’t reached the high of $58,640 that it hit on the 21st of February. Many pundits believe that it is just a matter of time until it does however, citing the recovery of US stocks as well as other indicators.
That sentiment is not uncommon, if the results of a Goldman Sachs survey is to be believed. The investment bank asked 280 clients for their opinion on digital assets and 54% predicted the price of bitcoin would be in the $40,000 to $100,000 range in 12 months whereas 22% predicted it would be more than $100,000.
Overall it is safe to say that the crypto latest news has the market feeling bullish, and bitcoin is definitely benefiting from it. That being said it is still very volatile, and there is no telling whether it will be able to sustain its current momentum.
Conclusion
It will be interesting to see how Goldman Sachs’ crypto trading desk is received when it goes live in just over a week or so. If it is successful it is highly likely that the bank will focus on the next step and try to quickly move on to the bitcoin exchange traded fund that they have planned.
Additionally, the fact that big financial institutions are launching crypto-related products and services is likely to buoy the entire industry and put it a step closer to becoming truly mainstream.
