Goldman Sachs to offer bitcoin trading: Expert warns of new 'wild west' for global finance
BITCOIN received a big boost late last week after Goldman Sachs shocked the finance world and announced that it will soon offer cryptocurrency trading. However, with the 2009 Financial Crisis still fresh, expert opinion remains divided over this unlikely “marriage”.
Goldman surprised both clients and market onlookers last week after announcing its arrival in the world of cryptocurrency trading through a futures-like contract. Goldman’s so-called “non-deliverable forward” is a toe-dip in the unknown waters of crypto trading where Goldman will use its own money to trade futures on behalf of customers.
Professor Daniele Bianchi of Warwick Business School explained the nuts and bolts of Goldman’s crypto trading to Express.co.uk as, “allowing you to invest in bitcoin without actually owning Bitcoin, opening ‘the box’ also for pure speculators.”
Rana Yared, one of Goldman’s executives involved in creating the future exchange, told the NYT that clients were asking to invest in bitcoin as a valuable commodity, similar to gold. She said: “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’”.
Addressing the price volatility and the fear that people’s savings could rise or fall at the click of a finger, Ms. Yared told the NYT: “It is not a new risk that we don’t understand. It is just a heightened risk that we need to be extra aware of here.”
These same bad actors want in on bitcoin and the blockchain revolution they have denounced for years.
Gabriel Francisco, TMT Blockchain Fund
However, reaction has been divided with chorus of concern sounding out against claims that further “proof” of bitcoin’s arrival as a part of mainstream banking.
Kevin Murcko, CEO of cryptocurrency exchange, CoinMetro heralded Goldman Sachs’ decision to open a bitcoin trading market as “a giant leap towards greater institutionalisation of the crypto-world”.
However, Gabriel Francisco of the TMT Blockchain Fund argues that bitcoin rose out of the ashes of an economic meltdown in 2009 - a crisis that began when the Glass-Stiegel Act was “shredded by Congress in 1999” and was compounded by banks like “JP Morgan Chase and Goldman Sachs working with hedge funds to bet against the toxic mortgages after the crash had started”.
He told Express.co.uk: “They made money by selling short on the financial catastrophe they had created. JP Morgan was fined $296.9 million and Goldman Sachs was fined $550 million for its actions.”
“Now, these same bad actors want in on bitcoin and the blockchain revolution they have denounced for years.”
Mr Francisco warns that “now is the time to run, not walk, into the sphere of cryptocurrency”.
With less than a decade of recovery from 2009 behind us, is the so-called “heightened risk” associated with cryptocurrency trading really worth it?
Waseem Sadiq, CEO, and founder, Tradebits.co told Express.co.uk that Goldman’s motives are, “to put it simply - ‘gain money and stay in business’.”
He said: “Goldman Sachs is one of the first among the traditional institutions that more or less announced that they can’t stay away from crypto trading anymore. The rest will soon follow.”
However, Siam Kidd, director of The Realistic Reader told Express.couk that big banks are looking at “manipulating” the crypto market before it “kills off” the banking industry. With the arrival of Goldman Sachs, Mr Kidd envisions a world where ordinary wallet holders are “clubbed like a baby seal by the big boys”.
He said: “The crypto space is the new wild wild west of markets. No regulations, scams and pump and dumps galore and the perfect hunting ground for predators to swipe money off punters hoping to make their millions."
Mr Kidd warns that, “if I were a big bank and I wanted to start manipulating the crypto market, it's simple. I'd force in a futures market so that I can start manipulating certain cryptos and then I'd buy one of the biggest crypto exchanges out there. This way I'd have a direct feed into the market and could very easily influence or control the market.”
He said: “Well that's exactly what's happened, Goldman has bought Poloniex. This is a marriage made in heaven for Goldman.”
A Goldman Sachs spokesman told Express.co.uk: “In response to client interest in various digital products, we are exploring how best to serve them in the space.”