Bitcoin down 70% - P2 - Stocks

Bitcoin down 70% – P2 – Stocks

The Trader

It will come as no surprise to many that Goldman Sachs has been one of the first major global financial institutions to plan a cryptocurrency trading desk. The US investment bank is famed for its progressive attitude toward the fintech sector (which includes cryptocurrencies) and has been clearing Bitcoin-linked futures contracts offered by CME and CBOE exchanges since May, as well as providing clients liquidity for those futures.

Goldman Sachs is now looking for an opportunity to seize upon the cryptocurrency boom to offset weaker trading in traditional markets. The bank’s plans to create a cryptocurrency trading desk is a sign of growing institutional acceptance of the fledgling market and could be mirrored by its peers.

As a first step, the bank is focusing on developing a safe, institutional-grade custody solution for cryptocurrencies. Additionally, according to Goldman CFO Martin Chavez, the bank is trying to develop over-the counter derivative contracts for Bitcoin, called “non-deliverable forwards”, further adding to the investment options for retail investors interested in the crypto space. (Source: CNBC, 7 September 2018)

Other investment banking institutions, including Barclays, JP Morgan and BlackRock have also created teams to investigate cryptocurrency trading. (Source: DowJones Newswires, 6 August 2018)

The Technology

While Goldman Sachs may be trading cryptocurrencies, other banks are taking a different approach. A consortium of major institutions, including the UK’s bank Barclays, has begun trialling how the technology that underpins cryptocurrencies, called the blockchain, can be used to guide institutions through the vast MiFID II financial regulations that have come into force in early 2018. (Source: Finextra, 15 December 2017)

Alongside UBS, Credit Suisse and Thomson Reuters, Barclays is investigating how blockchain-based smart contracts can improve data quality and simplify processes. A blockchain is a type of shared digital “ledger” that can be used to record financial transactions, legal information or customer data. Blockchain is incorruptible and easily verifiable, making is attractive to banking institutions for settling transactions and verifying financial data against multiple sources to protect against fraud.

The cryptocurrency boom pioneered by Bitcoin is merely one aspect of the digital banking revolution that is taking shape on financial markets at this very moment. As the value and acceptance of cryptocurrencies grows, more traditional financial institutions will become entangled with the underlying technology and benefit from adopting crypto-based technological standards.

And what of Bitcoin itself? On the next page, we delve deeper into the technical indicators behind Bitcoin, Goldman Sachs and Barclays.

Accendo Markets’ research team puts together similar daily publications daily on blue-chip equities, indices and commodities. For more personalised assistance in trading cryptocurrencies or crypto-linked equities, you can sign up to have our research sent directly to your inbox.

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

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Prepared by Michael van Dulken, Head of Research

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