Even big US banks see the idea of cryptocurrencies as a threat to them and unwelcome the usage of Bitcoin. But Goldman Sachs is taking digital currencies seriously and planning to offer Direct Bitcoin Trading in the controversial market. Well, the move would make it the first big Wall Street firm to deal directly in the controversial market or not, we still have to see.
“In response to client interest in digital currencies, we are exploring how best to serve them in this space.”
While the news may bring about a rapid legitimization of the cryptocurrency space, it will certainly open up Bitcoin and other crypto assets to increased scrutiny from government regulatory bodies.
Goldman Sachs to offer Direct Bitcoin Trading
Already the Federal Reserve has indicated that it is studying cryptocurrencies more in depth, and the SEC has filed regulatory rules regarding ICOs. The New York-based bank is in talks with cryptocurrency experts but hasn’t yet formulated a business plan. Among the questions, the bank is seeking to answer: how to address know-your-customer requirements and how to understand the risks of the volatile currency.
Goldman Sachs’s approach differs from that of JPMorgan Chase CEO Jamie Dimon, who said last month that bitcoin is a fraud and that he would fire any employee trading it for being “stupid.” The bank does facilitate trades of an exchange-traded note tied to the price of bitcoin.
Goldman has faced a substantial reduction in revenues (21 percent since last year). It seems that the problem is related to volatility. The company is still unable to take advantage of panicked buys and sells within the stock market. Moreover, it may be seeking a new source of volatility to allow its investors an opportunity to profit.
Bitcoin price analysis
Bitcoin briefly multiplied five times in price this year from below $1,000 to above $5,000. The digital currency plunged by $2,000 after a Chinese crackdown in September. Now, bitcoin recovered to its highest in nearly a month at around $4,410, according to a report. Much of the gains come as institutional investors increase their bets on the digital currency.
New "crypto-funds" are also launching. The latest tally estimates about 75 such funds now exist. In the meantime, Goldman Sachs could benefit from a new trading operation in a highly volatile asset like digital currencies. The bank reported a 40 percent drop in the second quarter in bond trading.
Think we missed something? Let us know your opinion in the comments section below.