Last month the Goldman Sachs CEO said his company had no plans to formulate a Bitcoin strategy as the market was too volatile. Reports today suggest that the financial giant is moving more quickly than expected and will set up a trading desk for cryptocurrencies next year.
In the first such move by a large Wall Street firm the desk would act as cryptocurrency market-makers. This means that they would hold deep positions in cryptocurrencies, and sell to buyers and buy from sellers. Profits are made from the “spread” between their buying and selling prices. Market-makers are commonplace in financial markets and play a vital role in ensuring liquidity and efficiency in mature markets.
Though most of the details are yet to be established the desk is expected to be up and running by summer of 2018. Cryptocurrencies are so new that established firms don’t know quite how to define them. It is unclear as to whether a crypto desk would function under fixed-income, currencies or commodities.
In November Goldman Sachs CEO Lloyd Blankfein said, “something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value,” adding that if Bitcoin worked out they would “get to it” but that he was “not guessing that Bitcoin will work out”.
However it seems that demand has taken the firm by surprise. Spokesman Michael DuVally said to Bloomberg, “In response to client interest in digital currencies, we are exploring how best to serve them.”
On the arrival of futures contracts in the Cboe and CME Goldman Sachs announced that they would act as a clearing broker for clients who wished to trade the contracts, though they did insist that some clients deposit the full margin for traded contracts.