A report surfaced yesterday, via Business Insider, that Goldman Sachs was ‘pulling back’ from creating a dedicated trading desk connected to cryptocurrencies. Call us skeptical. And here is why we would classify our feelings as ‘exceptionally skeptical’ of the news at the moment.
The news comes after months of speculation over when the bank would take the plunge and begin operating its cryptocurrency trading desk. Earlier in the year, a senior bank executive announced that Goldman Sachs would soon start offering Bitcoin trading services. At the time, such a statement was a sharp contrast from the bank’s less favorable cryptocurrency rhetoric.
**(even amongst the back and forth rhetoric Goldman Sachs is affecting millions of dollars of Bitcoin and other crypto trades for high net worth and ultra high net worth clients via liquidy pools provided by global OTC groups and crypto hedge funds tucked into larger institutional clients. Here is an example of how that works: An UHNW client wants to purchase 5,000 $BTC but do so ‘off exchange’. Goldman facilitates the trade via a ‘family office’ relationship that manages billions of dollars for other family offices across the globe. A ‘peer to peer’ transaction is brokered at or around current market prices, and unknown to exchanges and other parties. The family office affects the trade and the movement into a chosen wallet. All of it is started, brokered by, and finalized by Goldman.**
Inside sources who elected not to provide further details saying the bank had to abandon its plan due to regulatory issues. According to them, Goldman Sachs was keen to avoid the risks associated with trading volatile cryptocurrencies. That is what was said and the reasons giving for pulling back PUBLICLY. Goldman still trades Bitcoin futures on the CBOE and CME. Their traders (on Goldman trade desks) are tasked with creating profits connected to Bitcoin futures on these exchanges.
Despite rhetoric being floated regarding shelving its proposed Bitcoin trading desk plan, the bank isn’t completely abandoning all of its interest in the industry. Instead, Goldman Sachs reportedly wishes to move forward with the roll-out of its cryptocurrency custodial service.
And how is that dramatically different from a trading desk? Sure there is nuance involved and that the firm can claim that they aren’t actively trading cryptos and holding themselves out as market makers. But providing custody services, while also trading bitcoin futures, basically makes them ‘almost pregnant’. Again, call us EXTREMELY SKEPTICAL.
In May 2018, the bank became the first regulated financial institutions in the United States to offer Bitcoin futures trading. With the addition of custody services, the bank could potentially get ahead of the cryptocurrency curve as far as Wall Street is concerned.
Oh, and you can bet that they are acutely aware of the Bakkt launch in November and how they will further leverage client participation in Bitcoin via Bakkt and ICE involvement. No different than gold, soybeans, or oil, Goldman will participate in the trading of physical Bitcoin via Bakkt and the collection of exchanges connected to Intercontinental’s cache of properties.
What we are really saying here is that there is a play on words in effect at Goldman Sachs and in the Business Insider article. Goldman Sachs isn’t backing away from anything. They are actually pushing forward on a more important initiative in the crypto custody space and continuing to effect trades and transactions for clients.
The Goldman announcement sounds more like regulatory public relations than actual steps in one direction or the other. Be careful how you read into this ‘announcement’. We don’t believe it.