Goldman Sachs Chases Speculative Bitcoin Bubble, Restarts Crypto Trading Desk

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Written by Dana Sanchez
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Goldman Sachs Chased Speculative Bitcoin Bubble, Restarts Crypto Trading Desk. Photo by André François McKenzie on Unsplash

Wall Street banking giant Goldman Sachs, maybe fearful of missing out on skyrocketing bitcoin prices, has restarted a cryptocurrency trading desk after abandoning a similar effort when prices crashed by 70 percent in 2018.

The desk will serve as a market-maker, buying and selling securities on behalf of clients but not actively managing cryptocurrencies itself. This makes Goldman the latest institutional player to plow into cryptocurrencies as their values surge, Forbes reported.

Goldman’s cryptocurrency trading operation is expected to begin dealing bitcoin futures and non-deliverable forwards for clients next week, Reuters reported. Non-deliverable forwards are a type of derivative that allows investors to take a view on bitcoin’s future price.

Investors and some companies increasingly see bitcoin as “digital gold” and a hedge against inflation amid massive government stimulus during the coronavirus pandemic.

Bitcoin’s price has risen more than 470 percent in the past year, but it’s highly volatile. It reached an all-time high of $58,000 on Feb. 21 before falling back as much as 25 percent, only to recover somewhat. Bitcoin is trading at $47,240 as of this writing.

“This makes the coin 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,” Reuters reported.

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Since 2018, market infrastructure has improved significantly for bitcoin and other large cryptocurrencies. Many financial institutions offer products and services including CME Group Inc, Intercontinental Exchange Inc and Fidelity.

This has helped to attract other companies and institutional investors to crypto, including Tesla, which bought $1.5 billion worth of bitcoin and said it would start accepting bitcoin as payment. Bank of New York Mellon announced that it will start later this year to integrate bitcoin and other digital currencies into the same financial network it uses for more traditional holdings such as U.S. Treasury bonds, equities and tech stocks.

Business analytics company MicroStrategy, one of bitcoin’s biggest corporate holders, recently announced a new $1 billion investment in bitcoin. Morgan Stanley’s $150 billion investment arm is thinking about adding bitcoin to its portfolio, last Wednesday, and about a week prior, Bloomberg reported.