Will Goldman Sachs start to trade Bitcoin in the next 6 months? originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Samantha Radocchia, Co-Founder at Chronicled (2015-present):
For many people, the name Goldman Sachs conjures up images of Wall Street financiers in expensive suits. Others might remember heated congressional hearings from 2010. Whatever the case, there’s no denying that Goldman is a juggernaut in the financial sector. The name is practically synonymous with Wall Street and investment banking.
And it looks like they’re about to take the plunge into bitcoin trading.
Goldman Creates A Stir
Goldman announced it has begun researching a new trading operation for bitcoin and other cryptocurrencies, apparently motivated by their clients’ interest in the crypto space. This is huge for cryptocurrencies, because Wall Street’s reaction to them up to this point has been decidedly cool.
JP Morgan Chase CEO Jamie Dimon recently called bitcoin a “fraud,” and most banks have been less than receptive, to say the least. But blockchain and its currencies are an inevitability, not a fad–and Goldman’s sudden interest in cryptocurrencies means they probably recognize that inevitability.
In fact, their website already features an in-depth explanation of blockchain. They clearly know that blockchain technology is going to revolutionize the way we do business. But until now, financial institutions have generally been wary of cryptocurrencies, even though they use blockchain to secure and authenticate transactions.
The Wild West Factor
Much of that has to do with the current lack of regulation on these currencies. Bitcoin has been around since 2009, but it’s been extremely volatile in the past–plunging thousands of dollars, only to rebound and quickly regain its value. This lack of regulation and the volatile nature of the market actually helped with initial interest, but the lack of trust in the currencies has held back large-scale adoption.
Even just a couple years ago, the average person had only a general awareness of bitcoin. Maybe a tech-savvy friend liked to talk about it at parties. That was the extent of most peoples’ knowledge. Now that a major financial firm like Goldman is preparing to enter the market, it’s clear that no one should be ignoring bitcoin anymore.
But bitcoin isn’t the only player in crypto that’s gaining steam right now. Ethereum is also beginning to get mainstream approval from businesses and investors.
Ethereum’s Smart Contracts
Larger companies are beginning to recognize the way Ethereum’s platform and smart contracts can improve their supply chains and services. That’s because smart contracts essentially let businesses cut out the middlemen. In the past, businesses had to wait for approvals, investigate discrepancies, and utilize middlemen in their supply chains. But smart contracts solve those problems and streamline the process.
The contracts are written into the blockchain, and then executed when a triggering event occurs. The triggering event could be anything from products arriving in a warehouse to a spike in prices for manufacturing materials. As soon as the event happens, the contract is executed. But Ethereum is more than just smart contracts.
Initial coin offerings that are based on Ethereum’s platform have also been booming this year. If you’re not keeping up with the absolutely wild amount of ICOs currently being launched, I’ve got some numbers that may astound you. In the first seven months of 2017, over 400 ICOs raised $1.366 billion, mostly through Ethereum’s blockchain.
Placed in context with Goldman’s decision to explore bitcoin trading, it’s clear that blockchain and the crypto space in general are having a moment. With major investment groups and banks like Goldman entering the fray, there shouldn’t be any doubt about the very real prospect of blockchain and cryptocurrencies.
There will likely be pushback, as we’ve seen with Jaimie Morgan’s dismissal of bitcoin and China’s decision this year to ban cryptocurrency. But in reality, all that does is create more opportunities for those who are prepared for crypto.
What might we see next? Well, if Goldman Sachs starts trading bitcoin, we could see more steps toward more regulation and SEC compliance, which will likely be a good thing when it comes to large-scale adoption. Regulation provides a degree of trust and stability that just hasn’t been there for many people.
U.S. regulators already stated in July that companies raising money through ICOs have to follow federal securities laws. That by itself provided some of the guidance and clarity that many investors have been looking for.
All signs point to cryptocurrency going mainstream sooner than later. And Goldman’s interest in the crypto space should help bring people off the fence and into the future.