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Author Topic: [2018-09-10] Goldman Sachs Plans to Launch Bitcoin Derivative  (Read 134 times)
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September 10, 2018, 01:05:25 AM
 #1

Is Goldman Sachs' Martin Chavez correct in saying that there are no industrial grade custodial solution for bitcoin? The article also mentioned Xapo, Bitgo and Coinbase to be those solutions, but I reckon it might be more advisable if Goldman Sachs hire developers and build their own private solution.

In any case, if they hire me, I will teach them how to use Electrum hehehe.



Martin Chavez indicates that clients want a Bitcoin derivative, specifically saying “The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges”. Goldman Sachs is already settling Bitcoin futures contracts from the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) since May 2018. This new derivatives product Martin Chavez is talking about is like an in-house version of cash-settled Bitcoin futures.

It would be much better for Bitcoin, and much more groundbreaking, if the product Goldman Sachs plans to launch uses physical Bitcoins. However, Martin Chavez says “Physical bitcoin is something tremendously interesting, and tremendously challenging. From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.


Read in full https://bitcoinnews.com/goldman-sachs-not-abandoning-crypto-trading-desk-plans-bitcoin-derivative/

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September 10, 2018, 04:59:16 AM
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Martin Chavez indicates that clients want a Bitcoin derivative, specifically saying “The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges”. Goldman Sachs is already settling Bitcoin futures contracts from the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) since May 2018. This new derivatives product Martin Chavez is talking about is like an in-house version of cash-settled Bitcoin futures.

yawn. looks like more of the same---just cash-settled futures. if the contracts are non-deliverable, then no one will use these instruments as a way to buy or sell BTC. like the regulated futures markets that already exist, it won't affect the spot market.

Quote
From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.

i wonder what their criteria is. i know coinbase's recently launched product is marketed as institutional-grade. same with bitgo and xapo. bit insulting for them, eh? Tongue

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September 10, 2018, 09:16:34 AM
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yawn. looks like more of the same---just cash-settled futures. if the contracts are non-deliverable, then no one will use these instruments as a way to buy or sell BTC. like the regulated futures markets that already exist, it won't affect the spot market.
What did you expect? It's too much of a hassle for them to deal with Bitcoin since there is so much involved in securing and storing large amounts of it. We often don't realize how technical some of these practices are.

There has been an article not that long ago where Coinbase more or less demonstrated their process of generating keys and whatnot, and it really does look like it actually scares off large legacy players.

Overall, the less these institutions need to use the underlying asset, the less incentive there is for them to mess with this market. Yes, it won't sky rocket the price as some would have hoped, but these people miss the point of Bitcoin.

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September 10, 2018, 09:06:03 PM
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yawn. looks like more of the same---just cash-settled futures. if the contracts are non-deliverable, then no one will use these instruments as a way to buy or sell BTC. like the regulated futures markets that already exist, it won't affect the spot market.
What did you expect? It's too much of a hassle for them to deal with Bitcoin since there is so much involved in securing and storing large amounts of it. We often don't realize how technical some of these practices are.

There has been an article not that long ago where Coinbase more or less demonstrated their process of generating keys and whatnot, and it really does look like it actually scares off large legacy players.

yeah, i totally get that. but there are some legacy players who are at least exploring real deliverables. i know ICE plans to offer physically delivered daily futures contracts. i think they announced that back in august. i also saw today that citigroup is working a new physically backed instrument similar to an ETF: https://bitcointalk.org/index.php?topic=5025696.0

Overall, the less these institutions need to use the underlying asset, the less incentive there is for them to mess with this market. Yes, it won't sky rocket the price as some would have hoped, but these people miss the point of Bitcoin.

yeah the bright side of non-deliverables is that they can really only follow the unregulated spot market. not useful for price manipulation. they're only pegged to spot prices by arbitrage traders.

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September 11, 2018, 02:09:08 AM
 #5

Martin Chavez indicates that clients want a Bitcoin derivative, specifically saying “The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges”. Goldman Sachs is already settling Bitcoin futures contracts from the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) since May 2018. This new derivatives product Martin Chavez is talking about is like an in-house version of cash-settled Bitcoin futures.

yawn. looks like more of the same---just cash-settled futures. if the contracts are non-deliverable, then no one will use these instruments as a way to buy or sell BTC. like the regulated futures markets that already exist, it won't affect the spot market.

Quote
From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.

i wonder what their criteria is. i know coinbase's recently launched product is marketed as institutional-grade. same with bitgo and xapo. bit insulting for them, eh? Tongue

It is insulting but is he correct, or is his ignorance making him fear what he does not know?

Or maybe Goldman Sachs is secretly developing their own institutional-grade custodial solution? I reckon using institutional-grade security slogans might be good for their marketing strategy for their planned trading desk.

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September 12, 2018, 12:06:34 AM
 #6

Is Goldman Sachs' Martin Chavez correct in saying that there are no industrial grade custodial solution for bitcoin? The article also mentioned Xapo, Bitgo and Coinbase to be those solutions, but I reckon it might be more advisable if Goldman Sachs hire developers and build their own private solution.

In any case, if they hire me, I will teach them how to use Electrum hehehe.



Martin Chavez indicates that clients want a Bitcoin derivative, specifically saying “The next stage of the exploration is what we call non-deliverable forwards, these are over the counter derivatives, they’re settled in U.S. dollars and the reference price is the bitcoin-U.S. dollar price established by a set of exchanges”. Goldman Sachs is already settling Bitcoin futures contracts from the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) since May 2018. This new derivatives product Martin Chavez is talking about is like an in-house version of cash-settled Bitcoin futures.

It would be much better for Bitcoin, and much more groundbreaking, if the product Goldman Sachs plans to launch uses physical Bitcoins. However, Martin Chavez says “Physical bitcoin is something tremendously interesting, and tremendously challenging. From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.


Read in full https://bitcoinnews.com/goldman-sachs-not-abandoning-crypto-trading-desk-plans-bitcoin-derivative/

Again, they are trying to launch something that is a derivative instead of dealing with actual bitcoins, held on addresses.

All of these derivatives/funds/etc. are all going to be targeting other institutional investors or mainstream traders, instead of actually benefiting anyone that actually uses the bitcoin network for on-chain payments tangibly. They're essentially treating bitcoin as just another speculative asset, which it is in some ways, but they're focusing entirely on that aspect.

People need to understand that. It's why I don't really care about Goldman's decision to put their trading desk idea on hold, because it pretty much brings no benefits to bitcoin itself.

Also, I don't understand why they think that holding funds in Coinbase, Xapo, or Bitgo vaults are secure at all compared to just having a privately developed cold storage wallet. There are just so many counter party risks that could go wrong with vaults that involve a third party. The third party could always access your private keys, and access your funds (whether legally or illegally), regardless of the level of security they've got externally.

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September 12, 2018, 02:35:06 AM
 #7

They still do not feel safe enough to enter the market directly. And, frankly, I do not think this is critical for the moment. The fact that they recognize Bitcoin as an investment possibility, even if it is a derivative or anything, shows that there are more and more people within Goldman working in this area. Therefore, having profit, being safe and with regulations, more instruments would be used.

This triggers a wave. If the goldman is investing any penny in Bitcoins, it is almost a must that the other firms also study it. Customers are starting to ask for more and more options. I do not know if it is the ideal for the future of Bitcoin. But it should rather be regarded as a sign of the Bull Market just ahead.


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figmentofmyass
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September 12, 2018, 08:06:51 PM
 #8

This triggers a wave. If the goldman is investing any penny in Bitcoins, it is almost a must that the other firms also study it. Customers are starting to ask for more and more options. I do not know if it is the ideal for the future of Bitcoin. But it should rather be regarded as a sign of the Bull Market just ahead.

the CFO said as much---their clients want a bitcoin derivative to trade. so institutional interest is obviously growing. i wouldn't jump the gun on declaring a bull market, though. trading non-deliverable futures is a lot different than investing in BTC. these contracts can't be indefinitely held and will be settled in USD. they're just for short term bets on price, not investing. when i first got serious about trading (vs just holding), i was consistently shorting the BTC market in 2014. some of their clients are only interested in that. Wink

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September 19, 2018, 09:50:50 AM
 #9

Didn't Goldman Sachs just recently stated their worries with their trading desk project or whatnot with regulatory concerns? Yet they seem to still be extremely interested in the speculative aspect of bitcoin still.

It's also interesting that apparently their clients are requesting for bitcoin derivatives instead of actual bitcoins.

I don't know why these people do not want to trade actual, real bitcoins on an exchange. Most likely, it's because of the fact that bitcoin derivatives can be more easily manipulated as a tool for large scale market manipulation (which actual bitcoins isn't really good for), and this suits the needs of institutional investors. Not that groundbreaking news in my opinion, nor will it have a real tangible impact on the real people using the bitcoin network for payments if it was launched.

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September 19, 2018, 12:49:15 PM
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It's also interesting that apparently their clients are requesting for bitcoin derivatives instead of actual bitcoins.

I don't know why these people do not want to trade actual, real bitcoins on an exchange. Most likely, it's because of the fact that bitcoin derivatives can be more easily manipulated as a tool for large scale market manipulation (which actual bitcoins isn't really good for), and this suits the needs of institutional investors. Not that groundbreaking news in my opinion, nor will it have a real tangible impact on the real people using the bitcoin network for payments if it was launched.

It's not really related to manipulation why they don't want to deal with actual Bitcoins.

Most important factor is that there aren't any legacy players offering custodial services, and with how most investors can't be bothered with all the hassle that comes with storage, it's just not a viable option for them. Another factor is that most of the investors just want Bitcoin's exposure, and if cash settled products can deliver that exposure, there is no need for them to buy actual Bitcoin.

The same applies to myself as investor in the crypto space. I go long and short on altcoins frequently, and that without needing to buy the actual coins and install all sorts of buggy clients and whatnot. It's convenience.

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September 20, 2018, 08:01:54 AM
 #11

It would be much better for Bitcoin, and much more groundbreaking, if the product Goldman Sachs plans to launch uses physical Bitcoins. However, Martin Chavez says “Physical bitcoin is something tremendously interesting, and tremendously challenging. From the perspective of custody, we don’t yet see an institutional-grade custodial solution for bitcoin, we’re interested in having that exist and it’s a long road”.[/i]

Read in full https://bitcoinnews.com/goldman-sachs-not-abandoning-crypto-trading-desk-plans-bitcoin-derivative/

We can't say what they are up to exactly, and they won't tell us until they think it is the right time to. I don't know what this dude from Goldman Suxx means by "an institutional-grade custodial solution for bitcoin" but if he is familiar with how bitcoin works, more specifically, that transactions are irreversible, he may mean something else, something other than abstract Electrum wallet.

For example, they can look into a publicly known address with burned coins, that is the address which has no known private key associated with it, and use these lost-for-good bitcoins for issuing what they call "physical bitcoins". Those would be like infamous cash-settled futures, but at least you won't be able to blame them for issuing more bitcoins that have been burned.

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