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How Goldman’s Bitcoin Bid Might Impact Cryptocurrency

April 19, 2018 Blog

Cryptocurrency trading has long been complicated for many investors because the cryptocurrency was considered to be on the fringes of the world’s financial marketplaces. However, Goldman Sachs Group, Inc. has now confirmed that it plans to trade Bitcoin. Goldman’s entry into bitcoin trading could have major implications for the evolving cryptocurrency marketplace.

However, while Goldman’s interest in trading Bitcoin suggests that cryptocurrency investments could become more mainstream, there are still regulatory issues that need to be addressed and investors still need to understand their rights and obligations when buying bitcoin or other virtual currencies. A Bitcoin lawyer can provide advice and assistance to investors when making Bitcoin investments.

How Goldman’s Entry Into Bitcoin Could Change Cryptocurrencies

Investopedia recently analyzed some of the different ways that Goldman’s entry into Bitcoin trading could impact the cryptocurrency marketplace.

One of the biggest potential changes is that bitcoin may become a more liquid asset. Liquidity issues have long made institutional investors reluctant to buy Bitcoin and other virtual currencies, but  Goldman Sachs has many clients and is a big player in the finance industry so trading volumes will likely rise. Goldman has decided to enter into Bitcoin through trading futures contracts, so specifically volume for futures is expected to increase.

Goldman Sachs may also pave the way for other institutional investors to also begin trading Bitcoin, which could lead to the development of complex derivative products that incorporate bitcoin and other cryptocurrencies.

Many insiders in the cryptocurrency world are hopeful that Goldman Sachs will embrace existing trading solutions and tools within the existing cryptocurrency ecosystem in order to signal their support for exchanges that are currently operational. Goldman has not yet indicated what venue it will use for Bitcoin trading, but derivatives exchanges could see a big bump in trading activities if Goldman is seen as endorsing their trading platforms.  They could also attract more venture capital funding.

If order books are full, rapid trading could also change the way existing cryptocurrency exchanges operate. Many exchanges currently have only a limited number of investors, so it is not possible for complex order types to be offered and most exchanges currently cater primarily to investors who are looking to hold their investment in bitcoin rather than trading it quickly.

Since Goldman traders routinely move quickly in and out of trades and profit from incremental price changes, cryptocurrency exchanges may evolve to allow for this type of quick action. This could lead to the development of new features on cryptocurrency exchange platforms, which are currently lacking in tools common on regular trading platforms such as technologies that aggregate and display daily daily gains from multiple trades.

These are just a few of the many shifts that could occur thanks to Goldman embracing Bitcoin. If Bitcoin investing moves mainstream and you are interested in becoming an investor, you should speak with a Bitcoin lawyer about your options for complying with regulations and protecting your financial interests as you make trades.