In An Attempt To Become Pioneers Of Cryptocurrency Market In Wall Street, Goldman Sachs Set To Open Bitcoin Trading Operation
This Wednesday marked a watershed moment for cryptocurrencies when Goldman Sachs announced they would be opening up a bitcoin trading desk very soon. The development represents the first “official” Bitcoin trading operation at Wall Street. But it begs the question when will JP Morgan Chase Bank enter the fray and start their own cryptocurrency trading desk?
For Goldman Scahs, the Wall Street investment bank will soon start trading bitcoin futures with its own money for its clients, according to the New York Times. It will also trade non-deliverable forwards, another type of derivative product which the bank will create.
The multinational investment bank is going to leverage its own capital to trade in a variety of investment contracts linked to Bitcoin. However, the company is not trading in Bitcoin directly as of now but hasn’t ruled out the possibility of doing so in the near future. Many insiders believe Morgan Stanley bank will be the dark horse to keep an eye out for.
Goldman Sachs hops on the Crypto Gravy Train
It wasn’t too long ago when Lloyd Blankfein, the CEO of Goldman Sachs had publicly said that the digital currency was a “vehicle to perpetrate fraud.” Later he pivoted to milder criticisms of the cryptocurrency saying “Maybe Bitcoin is a bubble.” However, by the end of 2017, when Bitcoin was reaching dizzy heights of $20,000 USD he said in an interview with Bloomberg that “If Bitcoin works, We’ll get to it.”
There has been an increasing number of hedge funds and other large financial institutions around the world that have shown interest in digital currencies. Companies like Square have already begun offering Bitcoin services to their users while commodity exchanges in Chicago started allowing customers to trade Bitcoin futures contracts. And JP Morgan has already setup blockchain services in their Quorum project that is been in the headlines as of late.
Most regulated financial institutions have stayed away from virtual assets, with some going so far as to shut down the accounts of customers who traded Bitcoin. Financial establishment figures like Jamie Dimon, CEO of JPMorgan Chase, infamously called it a fraud and nothing more than a speculative bubble like the Tulip Mania of 1637.
In an attempt to maintain diplomacy between their establishment peers and the crypto-generation, Rana Yared, one of the Goldman executives overseeing the creation of the trading operation said “I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world. For almost every person involved, there has been personal skepticism brought to the table.”
Looking for regulatory approvals
Goldman Sachs realizes that adoption of Bitcoin comes with a heavy price of hurdles set by the regulators. They have already begun to clear trades for customers that buy and sell futures via the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE).
The bank’s first “digital asset” trader, Justin Schmidt, is looking at trading actual Bitcoin provided the bank secures regulatory approval from the Federal Reserve and New York authorities. They are also finding a way to securely hold Bitcoins as many Bitcoin exchanges have been prone to theft and attack by hackers. The current options for holding Bitcoins for clients is no way near Wall Street standards.
The extended slump of Bitcoin and other cryptocurrencies seem to be over as in April Bitcoin rallied back more than 30% to reach a valuation of over $9,000 mark. Most Altcoins also followed Bitcoin’s lead. With news such as the one coming from Goldman Sachs, crypto enthusiasts can be assured to see their digital asset in the green for coming months. Just the breaking of this news surged Bitcoin’s price close to $200 as it is itching towards the $10,000 once again.
No matter your take, Goldman Sachs crypto trading desk is a big deal and when JP Morgan unveils what their plans are it is going to solidify the space even more. We will leave you with this one quote from a source who ‘would know' what he is talking about, saying this:
Several of us have been reaching out to what we would call ‘mid-tier’ money managers that we know are on the cusp of opening crypto focused hedge funds. We have done some work with pure-play crypto funds as well, but we’ve been more specifically tasked to engage with firms that are apt to add to their current portfolios as opposed to starting from scratch. I can’t tell you who those are, as we are under NDA’s with several, but you can bet that things are moving quickly and deals are being struck. And you can guess why.”
“Goldman is taking a different track than we are and our directives seem to have them in our sights at the moment. If we are able to engage on a 1-1 basis, as opposed to through third parties (Circle et al) then we ultimately lead in the space.”
“Truth be told this is the next arms race. EVERYONE IS RUSHING INTO CRYPTOS. Everyone. There isn’t a bank, a fund, a fund company, a former legend attempting to reclaim old glory, private equity, venture capital, lending, exchanges, consulting firms – everybody. It is the digital gold rush. And our firm wants to get there and pull as many levers as we can.”
“Hedge funds were on the brink of a slow and painful death up until about a year ago. This is a double shot of adrenaline for all of them – or at least those that have the sack to jump into cryptos head first.”
What are your thoughts? Will JP Morgan Chase bank open a cryptocurrency trading desk like Goldman Sachs?