Goldman Sachs Starts Bitcoin Futures Trading
Investment banking giant Goldman Sachs announced that it will start to use its own money to trade Bitcoin futures contracts on behalf of its clients (1). Surprising, right? About 3 months ago, the same Goldman Sachs has warned investors that the rise in the value of Bitcoin has caused this virtual currency to become a “bubble”. The report (2), which was prepared by Goldman Sachs investment management unit, stated that the rapid increase in the price of Bitcoin has caused the virtual currency to surpass its real value on the market and became a so-called “balloon” level. The report also pointed out that the rapid increase in the price of Bitcoin is similar to the “Tulip Madness” in the Netherlands in 1634-1637. If you are unfamiliar with the term, the prices of tulip bulbs started to increase in 1634, and in early 1637, the price of a tulip bulb rose to 5 times higher than the price of an average dwelling in Holland. In February 1637, the prices of tulip bulbs fell sharply, causing producers and investors with futures contracts to suffer a great deal of damage. In short, no more than 3 months ago, Goldman Sachs stated that Bitcoin would see the same fate.
Yes, They Caved In
It seems they have changed their mind since they will start to offer futures trading for a “bubble”. The Goldman Sachs has not yet set a definitive start date for this service, but it is set to begin in the next few weeks. Rana Yared, one of the Goldman Sachs’ executives, said the ruling stems from increased customer interest in keeping Bitcoin as an alternative asset. According to the official statement; “Goldman will begin using its own money to trade bitcoin futures contracts on behalf of clients. 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’.” However, Goldman Sachs will not initially be buying and selling actual Bitcoins: They are still looking how to get a regulatory approval and trying to figure out how to deal with “additional” risks of holding virtual currencies.
As known, large corporations such as JPMorgan, Bank of America and Citi do not like crypto-currencies. In fact, they even close the accounts of Bitcoin trading customers. JPMorgan CEO Jamie Dimon described Bitcoin as a “fraud”. The decision of Goldman Sachs is very important for this reason: They are, perhaps, the most well-known brand in the finance world, and showing a positive attitude towards Bitcoin may start a “revolution” in Wall Street.
What is your opinion? If crypto-currencies are adopted by Wall Street, will their use become even more widespread? How will this affect their use in online gambling, in case they turn into a security instead of a currency? Share your thoughts with us.