Goldman Restarts Cryptocurrency Trading Desk

Tyler Durden's Photo
by Tyler Durden
Monday, Mar 01, 2021 - 01:00 PM

2018 was not a good year for bitcoin, and for cryptos in general: after hitting an all time high in December of 2017, much of the remainder of 2018 was spent with the crypto bubble deflating, with early crypto investors first casually than fervently taking profits and dragging the price of cryptos ever lower. The punchline came in September, when as we reported at the time Goldman - clearly disappointed with the lack of upside momentum - suspended its fledgling crypto trading desk plans...

... sending bitcoin tumbling back below $7000.

Well, fast forward a little over two years forward when following the 7-fold increase in the price of bitcoin since Goldman's cowardly exit, the bank - which has lost some of its top executives in recent weeks - has made a less than triumphant return and according to Reuters, has restarted its cryptocurrency trading desk and will begin dealing bitcoin futures and non-deliverable forwards for clients from next week.

As before, the team will sit within the U.S. bank’s Global Markets division, the Reuters source said, which means that while Goldman is putting on one trade for its prop traders, it will be using its flow desk to have clients to the opposite.

The desk is part of Goldman’s activities within the fast-growing digital assets sector, which also includes projects involving blockchain technology and central bank digital currencies, the person said.

Reuters adds that as part of this renewed bitcoin trading effort, the bank is also exploring the potential for a bitcoin exchange traded fund and has issued a request for information to explore digital asset custody.  The trading desk reboot comes amid growing interest by institutions in bitcoin, which has exploded more than 470% over the past year, outperforming any asset class pitched by Goldman's research desk.

Of course, the real reason why Goldman is interested in getting back to bitcoin is due to its wild volatility, which while painful for holders is extremely valuable for prop traders, and makes both the underlying token and related derivatives attractive for investors willing to take riskier long or short positions as they hunt for yield in a record-low interest rate environment.

As Reuters reminds us, since the first unsuccessful attempt by Goldman to launch a trading desk in 2018, market infrastructure for bitcoin and other large cryptocurrencies has significantly matured, with many established financial institutions offering products and services, including CME Group Inc, Intercontinental Exchange Inc and Fidelity. The developments have helped to attract more mainstream companies to the sector, ranging from those offering crypto services to retail or institutional investors, to companies opting to hold bitcoin on their balance sheets

Last month, Tesla said it had bought $1.5 billion worth of bitcoin, while Bank of New York Mellon Corp said it had formed a new unit to help clients hold and transfer digital assets.

Then, on Monday morning, hedge-fund billionaire Dan Loeb took to Twitter to share his thoughts on the subject. “I’ve been doing a deep dive into crypto lately,” he said. “It is a real test of being intellectually open to new and controversial ideas.”

Loeb’s comments were in response to a blog post titled “NFTs and a Thousand True Fans” by Chris Dixon, a general partner at the venture-capital firm Andreessen Horowitz. In Dixon’s post, he expounds upon the role that non-fungible tokens will have on digital creators.

Meanwhile, crypto continued to win over the world’s biggest financial institutions. As reported earlier, Citigroup laid out a case for Bitcoin to play a bigger role in the global financial system, saying it could become “the currency of choice for international trade” in the years ahead.

Bitcoin was 8.4% at just over $49,000 on Monday, despite the latest attempt by the NY Attorney General to spark a selloff: New York’s top law enforcement officer issued a scathing statement on the market and warned consumers about its susceptibility to “speculative bubbles” and abuse by criminals. “Cryptocurrencies are high-risk, unstable investments that could result in devastating losses just as quickly as they can provide gains,” Attorney General Letitia James said Monday in an investor alert.

Well, of course they are, and it's because of their massive risk that they provide just as massive returns, something which has not been lost on all those who held on to the token for the past several years and are now extremely rich thanks to it.