Goldman (GS) Might Initiate Bitcoin Trading Operation Soon

In this era of digitization where digital money is becoming popular, Wall Street giant — The Goldman Sachs Group, Inc. (NYSE:GS) — is planning to initiate a cryptocurrency trading operation involving bitcoin and other digital currencies. However, the digital currency trading business initiative is still in nascent stages, which if materializes, will need the bank’s strategic investments and involvement of currency-trading segments.

"In response to client interest in digital currencies, we are exploring how best to serve them in this space," a Goldman spokeswoman said in a statement.

However, some banks are against the concept of bitcoin. Last month, speaking against bitcoin, JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon called the digital currency a "fraud" that "won't end well." Further, last week, Morgan Stanley (NYSE:MS) CEO James Gorman noted that digital currencies like bitcoin are "more than just a fad."

Similar Moves

Recently, world’s six largest banks including Barclays (LON:BARC) PLC (NYSE:BCS) and Credit Suisse (SIX:CSGN) Group AG (CS) joined forces to make a new form of digital currency, the launch of which is scheduled next year. Financial transactions are going to be settled over blockchain, the technology that bitcoin uses.

Blockchain is a technology that allows users to distribute digital information without being copied. It is one of the most innovative technologies which help reduce risk and improve capital efficiency in financial markets. Though this was originally developed for bitcoin, the financial industry is coming up with other ways to explore its potential.

The main intention behind rolling this out is to enable financial groups to exchange money without waiting for physical money transfers, which takes a lot more time. Digital coins could be exchanged for cash at central banks and thus help in cutting costs for the banks.

Conclusion

Bitcoin has always been controversial and involved skepticism drawing regulators’ concerns related to security risks and scams. Notably, initial coin offerings have been banned in China and cryptocurrency exchanges have stopped trading.

Though Bitcoin's price has been volatile on market sentiments and on the crackdown in China, the same is expected to settle, as the digital currency gains market share. Notably, the total value of digital currencies came in around $150 billion compared with $17.5 billion at the beginning of 2017, which represents bitcoin’s value about half of all cryptocurrencies.

Therefore, if Goldman becomes successful in its initiative, weakness in bond trading affecting overall revenues might be counterbalanced to an extent.

Goldman currently carries a Zacks Rank #3 (Hold). Shares of Goldman have gained 48.3%, outperforming the industry’s rally of 38.3%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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