Now that Goldman Sachs has flipped on cryptocurrency and opened the first trading desk by a wall street bank, limited as it may be, the next piece of the puzzle to solve is custody, says Spence Bogart.
Goldman’s Desk Will Not Open the Flood Gates
The hype this week surrounding Goldman’s move into cryptocurrency has been overwhelming. The venerable Wall Street institution has taken the first tentative steps towards bringing institutional investors and Bitcoin together through a futures product they are calling a non-deliverable forward. The firm will be using its own money to buy the Bitcoin futures on behalf of their clients.
Dealing with Bitcoin futures allows Goldman to trade on the underlying Bitcoin Cryptocurrency without being directly exposed to what the bank sees as the volatility of the cryptocurrency market. Futures contracts are a way of buying and selling an asset at a fixed price at a specific predetermined date.
Justin Schmidt who Goldman Sachs brought on board as their first digital asset trader and to head the Bitcoin futures desk told the New York Times that he and his team look forward to eventually trading actual Bitcoin once “Goldman can secure regulatory approval and mitigate the risks associated with holding cryptocurrency.”
According to Blockchain Capital partner Spencer Bogart, the next step to putting institutional money into Bitcoin is solving the problem of custody. Bogart who appeared on CNBC’s Fast Money to talk about Goldman’s move said,
“Absolutely, it’s definitely a big step. I don’t think it’s a perfect solution that opens up the institutional floodgates for Bitcoin … I expect other banks to follow as well.”
Crypto Bull Bogart Calls Custody The Next Issue to Solve
He told host Melissa Lee that sequentially we saw the futures contracts come about, now a big bank opening a desk and that he would expect other large banks to follow because the market is so large institutions can’t afford to ignore them anymore. Bogart continued to say the next hurdle is custody. In his opinion for the major institutions to get into trading actual cryptocurrency, the risks that are inherent today in dealing with the underlying technology have to be solved.
Bogart said that since the issue came to the forefront in 2017 a dozen credible companies are going after a solution including Coinbase.
When asked for his prediction for the future of Bitcoin in terms of the custody issue Bogart talked about new buyers using apps like Robinhood and Square as well as major exchanges like Coinbase.