Goldman Adds a Crypto Trading Operation

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Goldman Adds a Crypto Trading Operation

According to a story published Thursday by The New York Times, Goldman Sachs Group Inc. (GS) is ready to become the first Wall Street bank to launch a bitcoin trading business. As big breaches and other scandals taint the developing digital asset class, the decentralized currency market has encountered difficulties in entering into the mainstream financial system. However, a move by one of finance’s most illustrious names might pave the way for the legitimacy of the crypto industry as well as bitcoin, the world’s biggest virtual currency by market capitalization. (Also see: Are Cryptocurrencies the “New Derivatives?”

The bank’s new cryptocurrency trading desk will provide forward bitcoin products, which involve no actual exchange of the underlying asset but rather an exchange of the quoted currency on the forward’s settlement date. While Goldman will not begin directly buying and selling bitcoins, a team within the bank is investigating the idea of seeking regulatory authority to do so, as well as evaluating how to effectively handle the increased risks involved with directly owning the digital commodity, according to the Times.

Goldman recruited veteran cryptocurrency trader Justin Schmidt as head of digital asset markets earlier this month, paving the way for the business to give customers wider exposure to cryptocurrencies.

Rana Yared, one of the Goldman officials in charge of monitoring the start of the new trading business, told the Times that the bank is fully aware of the dangers connected with entering the crypto trading market.

Gaining Legitimacy

When bitcoin was launched in 2009, its unknown creator, known only as Satoshi Nakamoto, boasted of the cryptocurrency’s potential to replace Wall Street banks.

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Bitcoin was trading at $9,400 at 4:40 p.m. UTC on Thursday, having gained 515% in the previous year. BTC breached the $1,000 barrier for the first time in 2013, and broke the $2,000 barrier in May 2017. In late 2017, a bitcoin craze spurred a surge in demand for the cryptocurrency, with BTC approaching $20,000—a new all-time high.

During the recent crypto boom, hedge funds and major institutional investors, as well as tech businesses such as Square Inc. (SQ), have joined regular investors worldwide in doing transactions involving risky digital assets. The Chicago Mercantile Exchange and the CBOE began enabling consumers to buy bitcoin futures contracts in December.

Goldman Sachs’ crypto activity, although not nearly a full-fledged trading desk, is the first big vote of confidence in the digital currency market by a licensed financial institution. (Also see: Goldman Hires Ex-Crypto Trader.)

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