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Goldman Bites The Bitcoin Bullet

Wall Street

Goldman Sachs this week became the first Wall Street bank to confirm that it will be opening its own Bitcoin trading desk, citing enough client demand for the service to warrant a foray into the crypto world.

While direct Bitcoin trading will likely come a bit later, Goldman will be leveraging its own capital for now to trade in contracts linked to Bitcoin.

The confirmation comes after an earlier announcement from Goldman that it would begin clearing futures in Bitcoin for clients in a move many anticipated would lead to this week’s news of a Goldman Bitcoin trading desk.

There’s nothing like a nudge from Wall Street to buoy Bitcoin. Thus, Goldman is helping boost prices right now:

(Click to enlarge)

It’s a bit step for a bank whose CEO described cryptocurrency just last year as a “vehicle to perpetrate fraud”. But no one should really be surprised, and it’s probably unfair to suggest that banks aren’t allowed to change their minds.

Cryptocurrency is moving into the mainstream and banks have to be able to adapt—and to understand when the timing is right. They also have to cater to customer demand.

The trick now is to proceed with caution, which is exactly what Goldman Sachs plans to do. Speaking to the New York Times, Rana Yared, the exec in charge of setting up Goldman’s Bitcoin trading desk, said the stance will be a careful one.

“I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world,” the Times quoted Yared as saying. “For almost every person involved, there has been personal skepticism brought to the table.”

Yared said Bitcoin was not “a fraud”, nor a currency. And it’s not about believing or not believing: It’s about demand, plain and simple.

Big banks can’t afford hype, and when hype is ruling the day, banks say things like Goldman said last year of crypto coins. When the hype starts to die down and things become real on a more normalized level, banks feel more comfortable stepping in, gradually.

According to a recent Thomson Reuters survey, some 20 percent of financial firms—including hedge funds and banks—are considering a foray into crypto, and 70 percent of those are planning such a move within the next three to 12 months. Related: Why Goldman Loves Commodities

"Cryptocurrency is still a relatively small part of the trading market, but this survey indicates this niche segment is starting to enter the mainstream of the financial services industry," Neill Penney, co-head of Trading at Thomson Reuters, said in a press release. "This is a major change from a year ago."

For Goldman, this crypto leap isn’t so much a leap as a careful saunter. Its first step, according to Fortune, will be to offer a limited number of derivatives—trading Bitcoin futures in a principal, market-making capacity.

To head up the digital assets markets and help clients gain exposure, Goldman has hired Justin Schmidt, who may end up heading the new crypto trading desk, according to some sources. And it should all launch within the next few weeks, according to the Times. 

By Michael Kern for Safehaven.com

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