The Wall Street titan is now all in when it comes to allowing clients to trade Bitcoin futures via one of its New York desks. Goldman Sachs becomes the first regulated financial institution to offer such a service. Part of the reason the firm decided to go this route is due to the several inquiries they received from hedge funds, foundations, and endowments which had received donations from Bitcoin millionaires. Goldman Sachs cosign of Bitcoin according to many crypto experts will increase confidence in the digital currency.
The legitimacy bar for digital currencies has been raised now that Goldman Sachs is going to facilitate the institutional trading of Bitcoin. They’re proceeding cautiously and will not trade actual Bitcoin initially. Instead, the bank will use its own money to trade Bitcoin futures contracts for clients. It will also trade non-deliverable forward futures where trades will be settled in the regulated currency it is quoted in.
Bitcoin had been on a rebound the past couple of months. Interest in the currency increased over the course of 2017, which also caused volatility to skyrocket. The price of the digital currency topped to $20000 which was triple its value in the second half of last year before dropping to $8,000 in February of 2018.
The cryptocurrency traded as high as $9,300 before South Korean officials raided South Korea’s largest cryptocurrency exchange, sending prices as low as $8,200.
While Goldman Sachs dips its toes in the cryptocurrency markets, CultureBanx found BitMEX is way ahead of the game. CEO Arthur Hayes helms this leading cryptocurrency derivative exchange. The company offers derivative products to retail investors and has a daily trading volume approaching $3 billion. BitMEX made $21 million in revenue during January of this year and posted a revenue of $83 million in 2017. The company is on track to exceed its 2018 performance.
Hayes said to Bloomberg:
“This is the best thing you could ever have. We make more money when the market goes down. We love this volatility.”
As institutional investors engage in these derivatives, they’ll be looking to ease their cautiousness by having a reliable benchmark for their performance. Goldman Sachs alumnus and billionaire cryptocurrency advocate Mike Novogratz announced a partnership with Bloomberg to launch the Bloomberg Galaxy Crypto Index. It will track the performance of the 10 most liquid cryptocurrencies.
Novogratz told Business Insider:
“This is just one more building block in the foundation which will get, at one point, pension funds and family offices and sovereign wealth funds all participating in the crypto economy.”
Bitcoin had a rough start to the year and suffered a major loss during the first quarter causing the price to plummet down 48%. Hayes noted we should be on the lookout for increased volatility in Bitcoin prices as more players enter the derivatives market for the cryptocurrency.
Hayes said on the Flux Podcast:
“People have been lulled into complacency with a market that keeps going up every day.”
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