It is interesting to note that one of the primary reasons Bitcoin started was due to the financial crisis of 2008. The downfall of Lehman Brothers in September 2008 followed by the huge bailouts using taxpayers’ money has completely highlighted the shortcomings of financial institutions and its infrastructure. “In decentralization we trust” has become the ongoing theme for Bitcoin, cryptocurrencies in general, and the overall blockchain technology movement. In simple terms, a decentralized system is not exposed to any attacks, having only minimal or null effects on it. Also, the system is not able to act independently and hence theoretically saving the “monetary system,” in this case the cryptocurrency from the folly of others.
Goldman Sachs to be the First Wall Street Bank Embracing the Bitcoin
Goldmans Sachs will be embracing the Bitcoin (Image from The Next Web)
It is to be expected that in the weeks ahead Goldman will start representing their clients in trading Bitcoin futures contracts using their own money. The goal is to offer their clients a non-deliverable forward (NDF), which is a more flexible version of a future to hedge exposure to currencies whose trade is limited or restricted. Goldman is also trying to achieve regulatory approval in buying and selling Bitcoins while establishing a system to manage the associated risks attached.
The Pull Factor
The huge interest in Bitcoin by Goldman is fuelled by multiple inquiries from hedge funds to endowments and foundations that has received donations in cryptocurrencies and is unsure of ways to manage it. Ms. Rana Yared, one of the Goldman executives overlooking the setup of the Bitcoin trading operation shared that Goldman has decided that Bitcoin is neither a scam nor does it possess the same characteristics with a currency. Furthermore, they have clients that strongly believe that the Bitcoin is a valuable commodity comparable to gold especially given its limited supply. Goldman has also been on a rebranding exercise post the financial crisis to reestablish its position as the most technologically advanced Wall Street firm. Pioneering this maneuver within the cryptocurrency sphere would reinstate this position they are building.
Led by Schmidt
Leading this operation would be Mr. Justin Schmidt who just joined Goldman in mid April 2018. Schmidt ventured out trading cryptocurrencies on his own in 2017. Prior to that he was an electronic trader with hedge fund Seven Eight Capital. He will get started first in the foreign currency trading in Goldman before moving on to trading Bitcoin depending on regulatory approvals. Schmidt believes he has found the missing piece of the puzzle for his cryptocurrencies trading in terms of having a trusted institutional player. And cryptocurrencies might have just found the missing piece of the puzzle for their legitimacy with these developments.
