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Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

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Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#61

Post by AnimalMuppet »

frgtpsswrdlame wrote: post #43
charlesdm wrote: post #34

Earlier quoted context omitted.

Best performing asset class over the last few years. Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy..

Well actually that's not what we advise but we're not GS either. >Best performing asset class over the last few years. Previous performance is not a predictor. >Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy If it's a bubble it's a terrible idea to allocate a few percentage points to it.

To expand on this a bit: I recall seeing that, if at the end of each year, you moved your money into the mutual fund that had the highest return during that year, in the next year you would have averaged -40% returns. Negative 40%.

Yeah, this isn't a mutual fund. Yeah, it's not directly applicable. But chasing previous returns is a way to lose money, not gain it.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#62

Post by cm2187 »

headmelted wrote: post #26
victor106 wrote: post #7

They typically do this for a few reasons: 1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don’t want to be criticized. 4. All companies are seeing a nice bump in their share prices with any association to crypto

Mostly I think it's 1. A lot of people jump on guys like Jamie Dimon and Lloyd Blankfein for calling Bitcoin massively volatile / a bubble / whatever, like they hate cryptocurrencies. They don't care, and they aren't supposed to. Their business is to sell whatever the customer wants to buy, cheaper or easier than they can get it elsewhere - and right now the customer wants to buy Bitcoin. Who cares if the backside fa…

They got burned by doing the same with subprimes, selling securities to clients who requested them but in which they did not believe themselves (and were shorting at the same time). This sort of move carries a significant reputation risk. I am sure not everyone at GS believes in crypto-currencies, there must be a lot of internal emails in the style "this is a pyramid scheme", "this thing will crash", etc... Reminds me a lot of 2007.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#63

Post by twic »

workthrowaway27 wrote: post #48
victor106 wrote: post #7

They typically do this for a few reasons: 1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don’t want to be criticized. 4. All companies are seeing a nice bump in their share prices with any association to crypto

They are just making markets, so it's sort of 1 and 2. I say sort of because it means clients want to trade cryptocurrencies. They aren't necessarily high net worth individuals though. My guess is most clients are institutional, though it might be different with people wanting to trade cryptocurrencies. It's FOMO if you think not wanting to lose money to your competitors is FOMO. I'd say it's more just performing one…

It's not entirely clear to me whether "making markets" means on exchanges, or over the counter. The term normally means on an exchange; over the counter, you're a dealer rather than a market maker.

If it's on exchanges, then it has nothing to do with high net worth clients, or any other kind of client, because they won't be trading with their clients specifically, they'll be trading with other market participants.

if it's OTC, then it could be part of a package of services for clients. That would still a bit weird, though, because a bank would normally act as a broker rather than a dealer for its clients - going to the market and finding them the best price, rather than making its own price.

I think that their reason is much simpler: they think they can make money doing it. I guess you could call that FOMO. But basically, they think that with their trading instincts, technology, and famously huge brains, they can move their prices around so that they can buy low and sell high without getting, as we say in the trade, their faces ripped off.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#64

Post by charlesdm »

frgtpsswrdlame wrote: post #60
AznHisoka wrote: post #47

Earlier quoted context omitted.

"If it's a bubble it's a terrible idea to allocate a few percentage points to it." Why? The word 'bubble' has negative connotations, but the flip side is the only opportunity of a great multiplier on your investment in a short time is during a bubble. Caveat of course, you can lose a lot of money, but that's why you allocate 1% of your portfolio so you can still survive.

Well part of that is how we define bubble, since it can only be post hoc, then by definition a bubble is bad since you're going to lose your money when it pops. But basically it's because we don't try to time the market in that sort of way. Bubbles are great if you can sell right when you need to and (1) Bitcoin is fucking godawful at that and (2) we don't want to try and do that. Better to invest long term and ride…

To be fair, I don't think your comparison to the craps wheel is fair. From a risk level, it's probably less risky than any form of angel investing.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#65

Post by AnimalMuppet »

nullbyte wrote: post #31
pmc1 wrote: post #23

My best guess is that the "store-of-value that can't be manipulated by banks" is effectively over. Big banks it seems will take over the trading volume of the big crypto coins and develop their own exchanges.

They may be able to partially manipulate the price, but they can't influence the currency or money supply. That's the beauty of crypto.

If they can't influence the money supply, but can influence its price, what difference does it make?

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#66

Post by frgtpsswrdlame »

charlesdm wrote: post #64
frgtpsswrdlame wrote: post #60

Earlier quoted context omitted.

Well part of that is how we define bubble, since it can only be post hoc, then by definition a bubble is bad since you're going to lose your money when it pops. But basically it's because we don't try to time the market in that sort of way. Bubbles are great if you can sell right when you need to and (1) Bitcoin is fucking godawful at that and (2) we don't want to try and do that. Better to invest long term and ride…

To be fair, I don't think your comparison to the craps wheel is fair. From a risk level, it's probably less risky than any form of angel investing.

Yeah I thought about that so I edited the comment to compare to TSLA options, bad timing, should've thought more before I submitted. To be fair though, it's my opinion that angel investing is also basically a craps wheel but I might be in the minority on this board in that opinion.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#67

Post by kregasaurusrex »

Chardok wrote: post #30
kregasaurusrex wrote: post #20

I'm sort of surprised there's going to be a regulated secondary market for this, where the newest version of the GOP Tax plan will place a fee on this form of arbitrage[1]. Then again, I did learn today that a hot wallet I had on a crypto-trading website had folded and didn't send me any notice of shutdown; along with the time period of filing a claim having been long passed. Since there's a lot of theft and lack of…

> maybe regulation could incentivize better data protection practices and pro-consumer behavior. Perhaps I am too cynical but given Equifax is still fresh on my mind I really have doubts the US government will do anything but pass laws to make sure they are getting taxes from cryptocurrencies.

While Equifax is a quasi-governmental company that's privately traded; fully private companies that are regulated in the space are required under the umbrella watch of FINRA/SEC regulations. In the past[1], they have not had any problem with levying 7 figure fines against organizations that are outside of data compliance.

Taxing cryptocurrencies will likely push traders who want a greater margin to foreign countries' exchanges; but I see it as a step in the right direction for institutionalizing the practice. I've seen a posts across multiple subreddits where people want to start trading these purely as investment vehicles rather than use the underlying technology. With an influx of ideologies working both with and against one another, a lot of ordinary people can get harmed from the wild-west environment and volatility associated with it.

[1]https://www.sec.gov/news/pressrelease/2016-112.html

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#68

Post by qaq »

workthrowaway27 wrote: post #48
victor106 wrote: post #7

They typically do this for a few reasons: 1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don’t want to be criticized. 4. All companies are seeing a nice bump in their share prices with any association to crypto

They are just making markets, so it's sort of 1 and 2. I say sort of because it means clients want to trade cryptocurrencies. They aren't necessarily high net worth individuals though. My guess is most clients are institutional, though it might be different with people wanting to trade cryptocurrencies. It's FOMO if you think not wanting to lose money to your competitors is FOMO. I'd say it's more just performing one…

"They are just making markets" are you seriously implying GS and JPM are just making markets :)?

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#69

Post by dahdum »

AznHisoka wrote: post #47
frgtpsswrdlame wrote: post #43

Earlier quoted context omitted.

Well actually that's not what we advise but we're not GS either. >Best performing asset class over the last few years. Previous performance is not a predictor. >Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy If it's a bubble it's a terrible idea to allocate a few percentage points to it.

"If it's a bubble it's a terrible idea to allocate a few percentage points to it." Why? The word 'bubble' has negative connotations, but the flip side is the only opportunity of a great multiplier on your investment in a short time is during a bubble. Caveat of course, you can lose a lot of money, but that's why you allocate 1% of your portfolio so you can still survive.

No idea how big the bubble grows before it bursts, or where it ends up afterward.

I found the risk/reward to be worthwhile, but I'm not risking what I can't afford to lose.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#70

Post by freeflight »

workthrowaway27 wrote: post #57
kingkawn wrote: post #19

Earlier quoted context omitted.

It is small, but has an indeterminate reach throughout the international economy. Nobody knows where the exposures to its collapse would be. A market panic could ensue from such a collapse, followed by other vulnerabilities becoming magnified in importance to the minds of investors. This of course is a guess, and it could well have little impact. But it seems that the risk is larger than the size of this market would…

It will have almost no impact at this point. It's not highly levered or used as collateral in the financial industry. There's no coupling between BTC and the rest of the financial industry.

> There's no coupling between BTC and the rest of the financial industry.

Maybe not right now, but the way things are going I wouldn't be too surprised if it actually ends up happening. I'm also sure plenty of people in the finance industry see this as a good profit opportunity; They might not find the gold themselves, but they will make plenty of money selling shovels to the people looking to find gold.

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