For years, Goldman Sachs has dismissed the peer-to-peer decentralized digital currency bitcoin. The Wall Street behemoth repeatedly warned that the cryptocurrency is risky and stated that its meteoric rise since its inception is insignificant. However, the financial titan is beginning to tergiversate from its bearish stance of just a few short months ago.
The global investment banking house told investors in August that they should no longer ignore bitcoin. In fact, Goldman Sachs has reportedly taken its own advice.
According to The Wall Street Journal, citing people close to the situation, it is launching a new trading operation that is entirely dedicated to bitcoin and other virtual currencies. This would make it the very first blue-chip Wall Street firm to begin working directly with the flourishing but contentious market.
Goldman Sachs is Bitcoin Bullish
The New York-based bank is in the preliminary stages of establishing a platform that would assist clients in trading bitcoin and other cryptocurrencies. Reports say that Goldman Sachs is speaking with a wide array of experts, but it has not formed a business plan.
Before it starts a new service, the financial institution wants to determine several factors, such as how to identify risks of the fluctuating currency and how to attend to know-your-customer requirements.
Ostensibly, Goldman’s initiative will consist of its strategic investment group and currency-trading division. This would suggest that the bank thinks bitcoin’s future will function more as a payment system rather than an asset and store of value similar to gold.
Tiffany Galvin, a spokesperson for Goldman Sachs, told Bloomberg:
“In response to client interest in digital currencies, we are exploring how best to serve them in the space.”
Considering that roughly $750 million worth of bitcoin trades occur on exchanges every day, Goldman Sachs wants a piece of the digital pie.
A date for implementation has not been announced.
Wall Street Has Mixed Feelings
Since bitcoin’s launch in 2009, Wall Street has shown mixed feelings over the digital currency. Some argue it’s just a fad or a bubble; others call it a wave of the future.
Morgan Stanley CEO James Gorman conceded that bitcoin is “highly speculative,” but added that “it’s not inherently bad.” Mike Novogratz, a former Goldman Sachs trader, created a $500 million hedge fund that parks money in cryptocurrencies and initial coin offerings (ICOs).
One of the most ardent critics of the virtual currency is JPMorgan CEO Jamie Dimon. For the last year, he has regularly slammed the cryptocurrency in the media. In September, Dimon called bitcoin a “fraud,” warning that it could surge to $100,000 before it collapses. He went as far as saying it is “worse than tulip bulbs,” a reference to the first speculative bubble in 17th century Holland.
A short time later, Dimon told CNBC-TV18 in India that governments will eventually shut down bitcoin:
“Right now these crypto things are kind of a novelty. People think they’re kind of neat. But the bigger they get, the more governments are going to close them down.
It’s creating something out of nothing that to me is worth nothing. It will end badly.”
Dimon’s remarks have garnered a fierce response from the bitcoin community. Late last month, Dimon was the recipient of a market abuse claim for “spreading false and misleading information” about bitcoin. Blockswater, an algorithmic liquidity provider, alleged that the Wall Street executive’s negative statements have affected “the cryptocurrency’s price and reputation.”
Florian Schweitzer, managing partner at Blockswater, stated in a complaint:
“Jamie Dimon knew, or ought to have known, that the information he disseminated was false and misleading. Jamie Dimon’s public assertions did not only affect the reputation of bitcoin; they harmed the interests of some of his own clients and many young businesses that are working hard to create a better financial system.”
Suffice to say, Dimon made a significant competitive mistake: he alienated a rich part of the market.
That said, he isn’t the only prominent bitcoin opponent. Peter Schiff, president, and CEO of Euro Pacific Capital, has noted multiple times that the digital currency is a bubble, doesn’t have any intrinsic value, and will fade away into the dustbins of history because there will always be something better.
Mine Your Own Business
To buy or not to buy? That is the question.
There is no doubt that if you mined bitcoin eight years ago, you would be a millionaire today. If you buy bitcoin today, you risk gaining massive returns or losing much of your investment – truculent bitcoiners will be quick to say that it will only go higher. The daily fluctuation levels are huge: in one day, the price of bitcoin tumbled from $4,150 to $3,230; the next day it would recover 5%.
For some, it isn’t about making money at all. It is about fighting the man.
Many have averred that bitcoin is a libertarian currency: it competes against the fiat hegemony, it can’t be monitored and tracked by authorities, and there is no middleman involved. This would seem like a convincing argument for any Ron Paul supporter, but something has happened over the last year: transactions are no longer anonymous, and governments and central banks have embraced both digital currencies and the blockchain.
For years, governments and central banks warned about the dangers of buying bitcoin and other virtual currencies. They even warned that you could face fines or imprisonment for owning cryptocurrency. However, their tunes have changed in the last 12 to 18 months.
The Federal Reserve is more open to the money, the Japanese government has legitimized bitcoin, and the European Central Bank (ECB) has admitted that it does not have the authority to regulate the currency.
Are the naysayers correct? Is bitcoin in a bubble? Or are the avid bitcoiners right? Is bitcoin the next big thing?
It warrants a discussion, but you should beware of the vituperation; don’t say anything negative in the company of a bitcoiner. They are as ferocious and intense as the Bernie Bro crowd.
Do you think bitcoin is the wave of the future? Let us know in the comments section!