Goldman Sachs isn’t one of those companies that will simply look at the revolution taking place before its eyes. Quite the contrary, one of the biggest investments banks is looking to benefit from the rising blockchain tide and at some point (in the near future?) provide its clients with an option to invest in Bitcoin, Ethereum and other cryptocurrencies, as well as put blockchain to good use to increase efficiencies of its own operations.
The “word on the street” is that Goldman is looking into legal implications of any move into this market. It is well understood these are highly volatile assets — if we can call them that — but they also come with potentially high returns.
“Still thinking about #Bitcoin. No conclusion — not endorsing/rejecting,” Goldman CEO Lloyd Blankfein has recently shared on Twitter, adding: “Know that folks also were skeptical when paper money replaced gold.”
Good to hear he hasn’t straight out rejected the idea (of Bitcoin trading).
Bitcoin could be real money in some places
In January 2018 – Goldman released a report suggesting that Bitcoin or some other cryptocurrency could be viable money in troubled economies.
“In recent decades the U.S. dollar has served its purpose relatively well,” Goldman Sachs strategists Zach Pandl and Charles Himmelberg wrote in a report. But “in those countries and corners of the financial system where the traditional services of money are inadequately supplied, Bitcoin (and cryptocurrencies more generally) may offer viable alternatives.”
However, the same report says that once that happens investors shouldn’t expect 2017-level returns.
“Our working assumption is that long-run cryptocurrency returns should be equal to (or slightly below) growth in global real output — a number in the low single digits,” the strategists said. “Thus, digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold or certain other metals.”
Regulations could be a problem
The problem for Goldman Sachs and other financial institutions could come from governments around the world which efforts to regulate the market could impact the value of Bitcoin and other cryptocurrencies.
For one thing, SEC thinks that more regulation is needed and has in that sense increased its capacity to react in this market. So far though, they have been focused on ICOs, but who knows where they could “strike” next.
Also, the fact that ICOs are in their “wild west phase” does leave a ton of space for wrongdoers to get some quick money, and — we think — some government agency should be able to put an order into the market. Finding the balance is hard though, as any move over the top could hurt the entire market.
Let’s say Goldman joins the market…
…And starts Bitcoin trading. That would undoubtedly boost investors’ confidence in digital currencies, propelling the demand and consequently the value of all major cryptocurrencies to the new heights.
There are no doubts that some Goldman clients are already demanding such option — or at least asking about it — but entering such volatile market does come with a risk. So will Goldman Sachs “push the button?” We tend to think they’ll start with a few select clients, and steadily grow from there, bringing many cryptocurrencies closer to the mainstream consumer. Now that’s a vision, don’t you think?