It is not unusual for different asset classes to intersect in meaningful way. Stocks and indices are intertwined. Currencies and commodities sometimes have deep ties. But when a major corporation jumps onto a new commodity, things get a little more interesting. This is exactly what is happening between Goldman Sachs and the Bitcoin right now. Goldman Sachs (GS) is one of the world’s largest financial institutions and they are just now beginning to address the issue that has been on many traders’ minds for many months now: how will the powers that be respond to the Bitcoin flare? And while initial actions and reports do not give a definitive account for this, it’s encouraging to note that this is finally going to be addressed. The Bitcoin’s future depends upon it.
As per their official position, Goldman Sachs is neutral on the Bitcoin and is not currently recommending buying it to their clients. This seeming “lack of a position” illustrates two things about the digital currency that need to be taken into account. One, it shows that Goldman Sachs has put a degree of thought into the future of this commodity/currency. And two, the decisions that they have made so far do not give the Bitcoin a lot of credit. If the Bitcoin was thought to be a viable long term investment, Goldman Sachs would have acknowledged this. The big question is why they are currently taking this position.
There are a couple reasons that come to mind. The first is the regulation question. It would look very bad for a major banking institution to publicly recommend something that might prove to be banned in a few years. According to recent news releases, it looks very obvious that the Bitcoin will at least be taxed in the near future, but the fraud and money laundering charges that have been levied against a few of the major players in this new market have not given the Bitcoin a good image to the public. Even if these charges are untrue, they have created a lasting first impression and this will likely be taken into account in how established organizations handle the Bitcoin.
The other reason that Goldman Sachs might be avoiding the Bitcoin question is that it doesn’t have good long term prospects. This is hard for people in the trading industry to take into account right now because of the amazing success that the Bitcoin has had so far. There was a news report a few months ago that the amount that a guy paid in Bitcoins for a pizza a few years ago would now be worth well over a million dollars. That’s a huge increase, but if it’s not going to last, it would be very foolish for any bank to publicly recommend it. And of course, if the Bitcoin does end up under Federal scrutiny for long, that would hurt it’s long term price prospects in a major way, too.
Binary options traders already have had some exposure to the digital currency. A lot of brokers allow you to trade it as if it were a currency, usually pairing it with the U.S. dollar. But remember, just because things don’t particularly look good for Bitcoin a few years from now, doesn’t mean that it won’t go up for the near future. Bitcoin has seen amazing success and just because its future is in question doesn’t mean that it’s going to immediately collapse. And uncertainty doesn’t equal ultimate doom, either. There are a lot more unanswered questions about the future of cryptocurrencies than there are answered ones, so it will be very interesting to watch this scene unfold for years to come.