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As I was preparing for a flight to Mexico for a reportage trip, Wednesday, the encrypted goods markets turned to tears. The supposed reason: a story by Business Insider which claimed that Goldman Sachs had planned to abandon his rumored search for a cryptocurrency trading desk. Apparently, the withdrawal of one of Wall Street's biggest and boldest names has alarmed investors, causing a selloff for Bitcoin and its siblings. Over the course of the day, the price of Bitcoin dropped about $ 1,000 to about $ 6,400 and has since kept on slipping.
Yet, a day later, Goldman's chief financial officer, Marty Chavez, described the newsletter to an audience of TechCrunch Interrupts, that Mecca of annual startups, as "false news". He said the bank expects to expand beyond simply clearing forward contracts, a service it already provides, to offer so-called non-deliverable forward. In other words, he said that the bank intends to settle the encryption contracts, but in dollars rather than in the asset itself. The next physical Bitcoin that exchanges borders, which requires secure storage of top-secret cryptographic keys, is "tremendously interesting and tremendously difficult," he noted
Curiously, Chavez's remarks have done little to give back trust in the markets. The price of Bitcoin was around $ 6,200 at the time of writing this newsletter. Encrypted enthusiasts were baffled.
I was puzzled by pessimism. Even the original story, which leads to panic, which Goldman has since debunked, said the bank was interested in pursuing a custody solution, a product to keep cryptographic assets secure. I considered this as a positive signal; the nascent cryptic industry needs more options to safely store this stuff. This does not mean that Coinbase, Gemini, BitGo and other financial newcomers offering stewardship services do not do it properly. But having blue chip banks like Goldman and JPMorgan Chase print their imprimatur on the Bitcoin coffers of them, will largely contribute to satisfying regulatory concerns on the market.
As Chavez warned on stage this week, "From the custody standpoint, we still do not see a custody case solution for custody cases for Bitcoin." If Goldman is really exploring a personal custody service, then Chavez's words are selfish. But he is not wrong.
Until then, it's no wonder why the Securities and Exchange Commission continues to reject applications for funds traded on the stock exchange with Bitcoin or ETF. (If you're interested in learning more about this topic, I've discussed the arrests of the agency on a recent episode of The Breakdown a show Fortune produces with its sister publications. ) Candidates have mostly proposed to offer these funds by negotiating Bitcoin futures contracts, rather than physical Bitcoins. But part of Bitcoin's charm and value proposition is its instant portability and its establishment. Why treat bitcoins like oil barrels?
I suspect that Bitcoin's ETF applications will have a better shot at approval once more custody options are available, allowing funds to manage physical activity itself.
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