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Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

bloomberg.com

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Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#71

Post by misterHN »

New York needs to outlaw bitcoin yesterday or explain to the other 49 states why more financial innovation is in American interests

Bitcoin is dangerous, it makes people act stupid. This entails costs to the societies in which bitcoin users live. These costs are born by everyone in the society, not just the stupid bitcoin owners.

Bitcoin owners should be treated like traitors who are undermining the Federal Reserve and the American economy. They have to be treated like animals, dangerous animals.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#72

Post by adamnemecek »

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 kinda do cause at that point they didn't have a slice of the pie.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#74

Post by vkou »

cm2187 wrote: post #62
headmelted wrote: post #26

Earlier quoted context omitted.

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 m…

That's not quite correct.

The problem with subprimes was that banks were issuing questionable loans, and then selling them to investors (Without telling them that the loans weren't worth the paper they were printed on.)

This carries a significant reputation risk because they were, quite literally, defrauding their customers.

A crypto trading desk, on the other hand, just lets them buy or sell crypto on a customer's behalf, and charge them a fee for it - much like Coinbase does for retail customers. They won't have any insider knowledge about crypto, and they probably won't even care if BTC goes to $100,000 tomorrow, or to $0. The customer asks the bank to sell them BTC, the bank gives them a quote, and the customer accepts or rejects it. The bank doesn't know if its a good price, nor does it care - and the customer knows that the bank doesn't know, or care.

There's still ways to defraud customers in this arrangement, but there are far fewer incentives to do so... Compared to offloading toxic, shitty mortgages off your books, after having bribed ratings agencies to rate them AAA.

If you really care about crypto, this is a Good Thing (tm). Currently, the counterparty risk with Bitcoin exchanges is through the roof. Some of them allow illegal wash trades, some of them don't follow KYC, some of them go belly-up and steal all your bitcoin and dollars, some of them may be front-running their users, some of them don't allow half their users to withdraw USD, some of them are down for minutes a day... For anyone trading in an extremely volatile environment (Like Bitcoin), this practically screams: "RUN, DON'T WALK AWAY."

The counterparty risk with a Goldman Sachs trading desk is... Much lower.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#75

Post by thess24 »

I've seen a few well know prop trading firms that are trading cryptocurrencies as well (Jump, DRW, probably others) and there doesn't seem to be too much talk of that. Goldman lends credibility and pretty much everyone has heard of them, so I get this is bigger news, but to me the more interesting news is in the trading firms.

Prop trading firms have no reason not to manipulate the cryptomarkets (it seems legal) and have the capital and knowledge to do so. Or am I missing something and manipulating these markets is illegal?

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#76

Post by charlesdm »

frgtpsswrdlame wrote: post #66
charlesdm wrote: post #64

Earlier quoted context omitted.

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.

I don't disagree with that, but by that definition, no investor should be taking any above average risk. I think being aggressive with a few percentage points of your portfolio on "long shots" or high risk stuff is not necessarily bad.

We have no idea how far cryptocurrencies will run. There will be corrections along the way, but if it actually is a major bubble it might very well run up to $10tn in market cap before we see a major correction.

But I agree with the options example. Just being OK with risking a part of your portfolio doesn't mean being stupid about it. You want to make sure that the upside is sufficient and the true downside isn't 0. Which is why I would say crypto currently seems like a better investment than angel investing or buying options. You are probably putting 50% of your capital at risk, for a potential 5 to 10x return.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#77

Post by ryanwaggoner »

notyourday wrote: post #17
krasotkin wrote: post #10

Earlier quoted context omitted.

> half a trillion USD is a tiny market What?

BTC market size is the $$/Yen/GBP/Euros exchanged into BTC a day and backwards, not Max(SomeOnePaidForBtc) * BTCs outstanding.

Interesting. Why is it this and not daily volume?

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#78

Post by vkou »

charlesdm wrote: post #55
workthrowaway27 wrote: post #52

Earlier quoted context omitted.

Because when a bubble bursts money has just been moved around but there's no net increase in wealth. Expected value is close to zero.

Which is why you need to have a clear exit point, not keep your money in forever. Fortunes were made (but also lost) during the dot-com bubble.

If Bitcoin were to crash, you wouldn't be able to exit. The exchanges would be overloaded, the price would collapse while you[1] can't trade, and you may also discover that some of the exchanges have stolen your money because they are insolvent.

[1] Although some whale customers may be able to. They may win big - or at least, lose less, at your expense.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#79

Post by nimchimpsky »

pmlnr wrote: post #39
nullbyte wrote: post #35

Earlier quoted context omitted.

You can't regulate cyptocurrencies. That's the beauty of the whole thing.

Hell you can. For example, you can make exchanges illegal. Done.

The definition of exchange would be hard to keep watertight.

Re: Goldman Sachs Is Setting Up a Cryptocurrency Trading Desk

#80

Post by nimchimpsky »

pmlnr wrote: post #41
1undo wrote: post #13

Welp pretty much knew this would happen all along. I was hoping crypto would remain independent of banks, but nope. Not long before big banks take over crypto exchanges, develop dark pools, and manipulate it. Not much we can do now

> crypto would remain independent of banks Only if you make a crypto that runs on any device, needs tiny amounts of energy and therefore is impossible to take over.

That's all of them isn't it?
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