Goldman Sachs Eyes Bitcoin Trading

Bitcoin price rises above USD 9 400 as crypto proponents hail the news

by Kalina Tekelieva
04 May • 2.5 min
In News

New York-based investment bank Goldman Sachs plans to open a Bitcoin (BTC) trading desk in the coming weeks, the New York Times reported on Wednesday, quoting executive Rana Yared.

In a step that is likely to be the first such operation at a Wall Street bank, Goldman Sachs intends to use its own money to trade with clients in a variety of contracts linked to the price of BTC. Its clients can trade BTC as a non-deliverable forward, where there is no physical exchange of the underlying asset but an exchange of the currency it is quoted in, likely in USD, on the settlement date of the forward.

The decision to start trading products linked to BTC reflects the increased client interest in cryptocurrency services. Yared explained that Goldman Sachs had received requests from different hedge funds, as well as endowments and foundations that needed assistance to handle donations in BTC.

The bank’s BTC trading desk is seen to bring legitimacy to cryptocurrencies, the New York Times wrote.

Regarding direct trading with the largest digital currency by market cap, initially, Goldman Sachs will not engage in buying and selling BTC. However, the bank is exploring opportunities to go that way as long as it can get an institutional license, according to the report.


Attitude to Bitcoin

While regulated financial institutions typically distance themselves from the cryptocurrency sphere, Goldman Sachs has concluded that BTC is not a fraud and cannot be characterized as a currency, Yared, who is responsible for the establishment of the new platform, said.

She admits she is not a “true believer who wakes up thinking Bitcoin will take over the world”. The bank’s CEO Lloyd Blankfein said for Bloomberg Television on November 30, 2017 that something that fluctuates by 20% in a day “doesn’t feel like a store of value” and added that it is too early for Goldman Sachs to have a BTC strategy.

In her interview for the New York Times, Yared said the limited quantity of BTC that can be mined drives some clients to hold it as a valuable commodity, such as gold. “It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value,’” Yared added.


Effect on BTC prices

The news about Goldman Sachs’ plans to launch BTC trading was met with enthusiasm in the crypto community. At the time of writing BTC price went up 3.3% to over USD 9 400, according to Coins.Online data.

When Business Insider asked Jon Matonis, co-founder of US non-profit organization Bitcoin Foundation, to comment on the influence that moves from big banks have on the crypto market, he said he expected a positive effect. In an interview published on April 2, Matonis claimed that decisions by financial institutions to enter the digital currency could help the market mature and reduce its volatility.