Goldman Sachs is reportedly launching a bitcoin trading operation where it will trade bitcoin futures contracts on behalf of clients using its own money, starting as early as the next few weeks. The Wall Street investment firm will also offer its own bitcoin futures product to clients.
According to the New York Times, Goldman Sachs is gearing up to launch a trading operation to buy and sell bitcoin futures for institutional clients. Reporter Nathaniel Popper wrote:
In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.
There were rumors last year of the firm planning to launch a cryptocurrency trading desk, such as a December Bloomberg article, citing people with knowledge of the strategy.
In January, CEO Lloyd Blankfein put an end to the rumors of Goldman Sachs launching a bitcoin trading desk, declaring that as far as “a principal bitcoin business where we’re going long and short bitcoin, market making, so far we’re not.” Nonetheless, CNBC quoted him admit that “we’re clearing futures in bitcoins for some of our futures clients. We’d clear them. We’re a prime broker and so if our clients are going to do it, we’re going to go do it.”
Clients Requests
Rana Yared, one of Goldman’s executives overseeing the creation of the trading operation, was interviewed by the New York Times. She conveyed to the publication, “the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted bitcoin millionaires and didn’t know how to handle them.” Citing that “the ultimate decision to begin trading bitcoin contracts was approved by Goldman’s board of directors,” she was then quoted:
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.
While her team had reservations about getting involved with bitcoin, Yared explained that “Goldman had concluded that bitcoin is not a fraud and does not have the characteristics of a currency,” the news outlet conveyed, adding that “A number of clients wanted to hold it as a valuable commodity, similar to gold, given the limited quantity of bitcoin that can ever be ‘mined’ in a complex, virtual system.”
Commenting on the risks involved with dealing in cryptocurrencies, she detailed, “it is not a new risk that we don’t understand… It is just a heightened risk that we need to be extra aware of here.” Popper elaborated:
While Goldman will not initially be buying and selling actual bitcoins, a team at the bank is looking at going in that direction if it can get regulatory approval and figure out how to deal with the additional risks associated with holding the virtual currency.
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