In a move that Bitcoin shepherds have long predicted and naysaying ‘no-coiners’ believed would never happen, the financial giant Goldman Sachs is set to open a digital currencies trading desk. Goldman Sachs’ own CEO Lloyd Blankfein has in the past taken no strong view of cryptocurrencies — remaining neutral and giving nothing away — yet it’s been in the edge of Goldman Sachs’ sights since late last year.
The financial firm will allow customers to trade Bitcoin as a non-deliverable forward (futures), as oppose to directly exchanging the cryptocurrency asset itself. One might ask why create something like this when the asset itself is arguably quite liquid? The 2008 financial disaster, which Goldman Sachs played no small part in, was a result, in part, of complex financial instruments such as derivatives. Products on products. Goldman Sachs are looking to essentially ‘print money’ in this move by creating a new trading platform tethered to the market price of Bitcoin. The service Goldman Sachs is offering itself should be examined with initial skepticism.
Regardless, this is a move that must have contributed to the recent push of Bitcoin upwards, taking many of the altcoins with it. Banks have steered well clear of cryptocurrencies in the past. Crypto is either entirely ignored or labeled a cheap gimmick. During an interview with the New York Times, Goldman Sachs executive Rana Yared even expressed apathy over the prospect of having this cryptocurrency trading desk under her as she leads the project. It’s possible this is merely Goldman Sachs putting one of their billions of fingers in one pie — just in case it’s an award-winning recipe.
Goldman Sachs’ story is essentially the embodiment of the American Dream, with a capital A. It’s not a popular organization, but it’s one in the stratosphere of wealth and power. It’s labelled a ‘guilt free’ institution, acting ruthlessly for its own interests: the very personification of a corporation, and ultimately, a poster boy for capitalism. The organization itself built its enormous wealth from financial disaster after financial disaster. It was famously likened to a ‘vampire squid’ by the great Rolling Stones piece back in 2010.
It will be interesting to see if Goldman Sachs tries to make any contribution of value to the Bitcoin sphere, but it’s highly doubtful, given the complete nonchalance of the executive team when asked about this move.
There is a cloud of concern persistently hanging over Goldman Sachs in this move too. The core reason many senior executives are cautious in wading into the cryptocurrency lake is the many previous interactions with the Security Exchange Commission. Nobody really knows, firmly, the legality of cryptocurrency (especially the legality over Initial Coin Offerings acting essentially as a round of funding). No doubt the regulatory team at Goldman Sachs is collectively scratching their heads — it’s not as if any Western government has made substantial moves to give the market clarity on the issue.
And this question of legality is a huge issue when it comes to mainstream adoption.
Nonetheless, this step forward is a significant one. It’s a step towards genuine legitimacy in the cryptocurrency market. Everyone currently in the market has a real opportunity to see something special unfold as the virtually finite characteristic of Bitcoin is realized by a perpetual increase in value over time. The inflationary nature of central bank issued currencies is an unsustainable model. A model that would never last and that may eventually be overhauled. In the meantime, Bitcoin is proving a real alternative as it continues powering on and its nodes increase in volume.
Think back to 2013. Only short five years ago. Bitcoin had its little hole in the wall in New York City, on its way down, and the major banks and financials would have laughed as they passed.
This isn’t just a financial giant seizing an opportunity in 2018, it’s a financial giant from the old world formally recognizing Bitcoin as a genuine store of value. It’s a sure sign of global adoption. It’s a major bank unable to ignore the elephant in the corner any longer. Now the big guys are catching the ‘fear of missing out’ bug.
There is money to be made. There is a new asset on the block. It was made by the people, for the people, and now the executives at the top — the very people who vicariously had a hand in creating Bitcoin by destroying the middle class — are after a slice of it all.
Will this create a new push for governmental regulatory action? Will this be the beginning of a runaway train as more and more giant financials get involved? Time will tell, as always. But the overall portfolio strategy for 2018 is shaping up to be ‘buy as much as you can, as often as you can, and hold it.’
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