Goldman Sachs Investing in Cryptocurrenices: What Does this Mean for Investors?

The U.S investment bank Goldman Sachs Group recently announced that it is opening a cryptocurrency trading desk. Hence, the push for widespread adoption in the cryptocurrency space. The bank also announced that it would clear bitcoin futures trading for some of its clients.

The company will allow bitcoin to trade as non-deliverable forward future through its clients. There shall be no physical exchange of underlying asset but an exchange of the US Dollars where settlement is required.

CBOE Futures Exchange and the Chicago Mercantile Exchange offer the derivatives that allow traders to bet on cryptocurrency price without buying the underlying assets.

Bloomberg believes that for bitcoin Goldman will not act as a market maker, and in fact, it will decide who gets the derivatives on a case by case basis.

Citigroup, Bank of America Merrill Lynch and a Royal Bank of Canada are telling customers that they might not have access when future trading goes live the Wall Street Journal reported. Such announcements are the outcome of the bold decision made by Goldman to open crypto trading desk through its clients.

“Something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value,” Blankfein the CEO of Goldman told Bloomberg TV. He uttered these words in connection with the company’s strategy towards bitcoin.

Goldman Such has also decided to launch one of its very own bitcoin rivals which would be termed as Circle USD coin. This would be the first cryptocurrency that would be created and released by world’s leading financial giants.

How would this Decision by Goldman affect the People?

  • Since Goldman is a big firm, its entry into the crypto market implies the fortunes of the nascent cryptocurrency industry.
  • There might be an increase in liquidity profile for bitcoin and other cryptocurrencies.
  • Institutional investors believe that in the current state, cryptocurrency investment is like venture capital investing for large investors.
  • As even more institutional funds would pour into the market, the most noticeable impact would be on bitcoin’s trading volumes.
  • Bitcoin might turn into a high risk/ high return asset, and it may also attract more risk-seeking institutional funds.
  • There might be a corresponding increase in the trading of bitcoin derivatives. Other may emerge with heightened demand for hedging instruments.
  • Bitcoin volatility may be calmed with the help of more liquid derivatives market because hedging reduces the need to churn positions.
  • Bitcoin may also emerge as a competitive tool.

Bauerle believes that it would be a tempting proposition to hold bitcoin in physical custody once the trading derivatives have started. Goldman is not speaking much on cryptocurrency. The only statement that it issued in February was a prediction stating that the value of all cryptocurrencies might fall to zero in the near future.

Investing in cryptocurrencies and initial coin offerings is highly risky. It’s recommended to consult a qualified professional before making any financial decisions.