Wall Street titan Goldman GS Sachs is all in when it comes to allowing their wealth management clients to invest in Bitcoin and other digital assets, starting in the second quarter. Even though the digital currency remains highly volatile, Bitcoin’s price has skyrocketed, topping the $60,000 mark in mid-March and its coins in circulation are worth more than $1 trillion. Will Goldman Sachs’ cosign of Bitcoin investments for its wealth management clients increase confidence in other major financial institutions to do the same?
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The legitimacy bar for digital currencies has been raised now that Goldman Sachs is going to facilitate the investment in Bitcoin by its wealth management clients, according to CultureBanx. Its private wealth management division is catered towards the wealthiest of clients, those with a minimum of $25 million to invest and they want in on the Bitcoin action.
“There are also a large contingent of clients who feel like we’re sitting at the dawn of a new Internet in some ways and are looking for ways to participate in this space,” said Mary Rich, who is slated to become the new global head of digital assets for Goldman Sachs private wealth management division.
While Goldman Sachs dips its toes in the cryptocurrency markets, Morgan Stanley MS has also started offering clients investments to the emerging asset class. As institutional investors engage in these derivatives, they’ll be looking to ease their cautiousness by having a reliable benchmark for their performance.
Goldman Sachs alumnus and billionaire cryptocurrency advocate Mike Novogratz announced a partnership with Bloomberg to launch the Bloomberg Galaxy Crypto Index. It will track the performance of the 10 most liquid cryptocurrencies. “This is just one more building block in the foundation which will get, at one point, pension funds and family offices and sovereign wealth funds all participating in the crypto economy,” Novogratz told Business Insider.
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Last month Goldman restarted its cryptocurrency trading desk and that it was also exploring possibilities for a Bitcoin exchange-traded fund. Initially, they did not actually trade Bitcoin, instead the bank used its own money to trade Bitcoin futures contracts for clients. It also trades non-deliverable forward futures where trades will be settled in the regulated currency it’s quoted in.
The firm was the first regulated financial institution to offer such a service. Part of the reason the firm decided to go this route is due to several inquiries received from hedge funds, foundations and endowments which had received donations from Bitcoin millionaires.
CNBC reported that Goldman would ultimately offer investments in Bitcoin and digital assets that would include the physical Bitcoin, derivatives or traditional investment vehicles. It will be interesting to see just how much volatility institutional investors are willing to stomach as more players enter the cryptocurrency derivatives market.