
Goldman-Backed Circle Buys Digital Exchange Poloniex - tesrx
https://www.bloomberg.com/news/articles/2018-02-26/goldman-backed-circle-buys-digital-exchange-poloniex
======
baccredited
'The first thing you need to know about Goldman Sachs is that it's everywhere.
The world's most powerful investment bank is a great vampire squid wrapped
around the face of humanity, relentlessly jamming its blood funnel into
anything that smells like money.'

[https://www.rollingstone.com/politics/news/the-great-
america...](https://www.rollingstone.com/politics/news/the-great-american-
bubble-machine-20100405)

~~~
dsacco
This is an edgy soundbite, but I don’t think it contributes anything
substantive to the discussion of a cryptocurrency exchange being acquired by a
GS subsidiary. I could have replaced “Goldman Sachs” with “Google” and I’d
have received the same amount of insight.

~~~
barkingcat
Goldman Sachs is so much bigger than Google. Google is substantial, but it's
nothing compared to Goldman Sachs.

Goldman is a company that's funded entire wars, on both sides of conflicts. If
you dig behind almost all revolutions, governments, and companies, on the
planet chances are Goldman Sachs is behind there lurking.

Google can only dream of having 1/1000th's the influence of Goldman.

~~~
dragonwriter
> Goldman Sachs is so much bigger than Google.

Goldman is more politically connected (and more widely invested, at least per
dollar of assets, because _it 's an investment bank_, and not tech firm that
invested in other firms incidentally), sure, but Google is much bigger by many
measures (nearly 8 times the market cap, for instance.)

~~~
barkingcat
Market cap is kinda a misnomer - a snapshot in time that doesn't mean much.
How about use something like total volume of capital that's flowed through the
company/or facilitated by the company? For Goldman Sachs that would be
trillions or on the order of the GNP of the largest countries.

~~~
dragonwriter
> How about use something like total volume of capital that's flowed through
> the company/or facilitated by the company?

Sure, if you measure by exactly what an investment bank specializes in, its
unsurprising that Goldman does somewhat more of it than Google, but still...

> For Goldman Sachs that would be trillions or on the order of the GNP of the
> largest countries.

For Google, if it hasn't already crossed into the trillions it will soon; at
over $100 billion in annual revenue with over 20% annual revenue growth, it
doesn't take that long to pump a trillion dollars through even without
counting money flowing through in forms of transaction facilitation that
aren't revenue, such as Google's various payment systems.

~~~
rokhayakebe
And JP Morgan Chase moves $6 Trillion per day.

------
sna1l
I'm surprised that Nasdaq, BATS, or some other conventional equities exchange
operator hasn't gotten into the cryptocurrency exchange business.

A lot of the issues with current exchanges is a combination of scaling issues,
scaling/trust, and regulation. I feel like conventional equities exchange
would be able to deal with those issues quite easily

~~~
Klathmon
In my opinion it's a completely different area that isn't as similar as you'd
expect.

For starters, cryptocurrency exchanges need to know the crypto they trade with
VERY well. It's an area where the law won't help you if you mess up. If
someone steals a bunch of bitcoin from your exchange, a police report isn't
going to get it back, it's gone for good.

Then add in that crypto exchanges are 24/7 (not just during business hours),
and I'd argue that scaling them is much harder, nobody knows if
cryptocurrencies will double (or more) in usage over the next few months, or
if they will halve (or more) in that same time. A single runup could cause 10X
the trading activity overnight.

I do think that we need more legal, regulated competition in this area, but I
don't think for a second that the answer is Nasdaq trying to shoehorn
cryptocurrencies into their current systems, they are just too different.

~~~
saosebastiao
> For starters, cryptocurrency exchanges need to know the crypto they trade
> with VERY well. It's an area where the law won't help you if you mess up. If
> someone steals a bunch of bitcoin from your exchange, a police report isn't
> going to get it back, it's gone for good.

With good KYC regulation and enforcement many "hacks" can be mitigated. The
Bitgrail hack, for example, was performed by _customers_ taking advantage of
shitty code. Presumably they know which accounts withdrew funds, but if they
knew who the customers were that belonged to those accounts, they could go
after them. This stuff is a big reason why I support exchanges being regulated
as money transmitters.

~~~
russdpale
I disagree. KYC means nothing after the hack has happened. I dont care about
people being retroactively punished, I want my coin back.

------
mk44
Banking institutions are slowly making crypto more and more legitimate. I hope
this trend continues. Disclosure: I REALLY believe in Bitcoin.

~~~
lbotos
I don't usually engage on Crypto posts but I'll bite. _What_ specifically do
you believe in with regards to Bitcoin?

I'm bullish on crypto as a global "internet dollar" but bearish that Bitcoin
is the right one.

I might add that banks want in because they make money on orderflows. Bankers
will trade anything (orange juice concentrate/pork
belly/oil/derivatives/shares/you name it.)

~~~
lawlessone
Personally i think bitcoin and maybe Eth and LTC will be the only long term
survivors.

Every new "coin" that comes along now just becomes a pump and dump.

Bitcoin was around before it had any value and people were just giving it to
one another for fun or buying Pizzas for 20,000. It has benefited most from
the "network effect" . My only major concerns about it are the environmental
effects and transaction throughput.(other coins are allegedly faster for now
but will probably buckle if they become as big as the above three.)

LTC is around nearly as long ,, and ETH is a whole new concept, though it has
security and programming issues.

I should mention its survival doesn't mean it's value will go up.

~~~
nugga
I'd add something like Monero, or other coin designed with privacy/fungibility
in mind, as a long term survivor. Bitcoin's development bureaucracy is too
slow and cumbersome and who knows how much the community is willing to embrace
absolute privacy, yet that is exactly what plenty folks in the crypto scene
prefer.

------
dmix
> there has been more hesitancy around what to do with digital assets like
> Bitcoin due to volatility and a history of it being used in shady
> transactions like drugs and evading taxes.

Yes, all of those low-level tax evaders with their thousands of dollars in
Bitcoin avoiding taxes via easily traceable transaction and plenty of digital
forensic evidence! That's the real concern preventing bitcoin's adoption by
legitimate businesses. /s

The IRS could employee <10 people fulltime to monitor these guys each year and
not break even in returnable taxable income...

There are far bigger problems with cryptocurrency adoption/scaling that are
tirelessly being worked on.

Money laundering and tax evasion via cryptocurrencies has hardly resulted in
any level of significant criminality, despite the endless years of FUD/hype
that it's attracted...

~~~
nosuchthing
Have you followed the bitcoin / cryptocoin community at all?

[https://bitcointalk.org/index.php?topic=1102135.0](https://bitcointalk.org/index.php?topic=1102135.0)

[https://forum.bitcoin.com/dev-tech-talk/simple-guide-to-
tumb...](https://forum.bitcoin.com/dev-tech-talk/simple-guide-to-tumbling-
bitcoins-t16395.html)

Freedom from law and oversight is mostly what the Cryptocoin anarcho-
capitalist and libertarians focus on as the primary benefit. Satoshi's white
paper stresses the feature of pseudo-anonymous transactions. Bitcoin tumbling
has been going on since the very early days of the Bitcoin network. zKSnarks
are an innovation to make this even more obfuscated and less traceable.

This is why a few of the most famous Bitcoiners are trying to establish a tax
haven in Puerto Rico.

    
    
      Dozens of American entrepreneurs, made newly wealthy by 
      blockchain and cryptocurrencies, are heading en masse to 
      Puerto Rico – a US overseas territory – this winter. They 
      are selling their homes in California and establishing 
      residency on the Caribbean island in hopes of avoiding 
      what they see as onerous state and federal taxes on their 
      growing fortunes, some of which reach into the billions of dollars.
    

[https://www.independent.co.uk/news/long_reads/us-bitcoin-
pue...](https://www.independent.co.uk/news/long_reads/us-bitcoin-puerto-rico-
blockchain-cryptocurrency-steve-bannon-pierce-brock-a8198491.html)

ICOs and fundraisers are an easy front for money laundering in cryptocoin
land.

[http://www.fraud-magazine.com/article.aspx?id=4294993747](http://www.fraud-
magazine.com/article.aspx?id=4294993747)

~~~
cgmg
Do you realize that none of what you said contradicts the GP?

------
stevievee
None of these exchanges regulate against price manipulation.

Based on Goldman's well documented history of price manipulation tactics (in
regulated markets), allowing them to own an unregulated exchange is just about
the worst thing to happen to cryptocurrencies in a long, long time.

------
JustAnotherPat
Serious question: How does Circle afford a $400 million price tag when they've
only raised $135 million? Their main product seems to be a Venmo clone,
complete with the lack of fees. Surely, they're not making that much money
selling user data.

~~~
tomasien
Circle's main product is an OTC crypto trading desk which has been killing it.
They move huge volumes for big players.

~~~
nnx
TIL that Circle pivoted into OTC, there's no mention of it on their main
[https://circle.com](https://circle.com) where they had the previous product
running.

[https://www.circletrade.com/](https://www.circletrade.com/) and simple
searches do not give much information.

~~~
tomasien
Yeah they're keeping their old products running, hoping to be a full service
bank for crypto. The OTC desk is where the money is.

------
tlrobinson
I wonder if this says something (good) about the Tether situation, given
Poloniex uses USDT.

~~~
ShorsHammer
Im sure the conspiracies will continue unabated despite Goldman Sachs buying
the largest tether exchange in the US.

There's a certain hivemind around tether that wont necessarily be convinced by
the due diligence on a large deal. For some that Goldman is involved is only
more evidence.

Tether is a lesson in not believing the commonly accepted "truths" in online
forums. Paid comments and self-interest abounds. Reader beware.

~~~
wepple
Claiming that people who don’t love tether are “Paid comments” is especially
weak coming from a 27-day-old HN account.

They’ve taken a lot of regular folks money and provided no confidence to date
that they’re solvent.

~~~
ShorsHammer
Having faced the wrath of a real name associated with comments on
cryptocurrency and especially tether I'll happily wear the month old badge. It
was implied to not trust any comments including mine, account age doesnt seem
to be a problem for such statements.

Online sentiment is purchasable, many icos offer pay-per-comment schemes and
unsuspecting people read enough sockpuppet comments eventually believing it as
fact, this is not contained to cryptocurrency and I worry when it seriously
spreads to more important parts of modern life.

> provided no confidence to date that they’re solvent.

Goldman Sachs just bought a good fraction of all tether in existence for
hundreds of millions, does this not say something?

Please check my other comment here for a proposition.

~~~
sitepodmatt
Goldman Sachs didn't buy anything. That's like saying I'm about to buy to
Qualcomm because I own a few shares in Broadcom (or vice versa depending on
who is buying who). The purchaser, Circle, didn't buy tether either, they are
a custodian of various cryptocurrencies tokens on behalf of users, by your
same logic GS just endorsed BitConnect (presuming it's still trading, but we
can replace with any other shitcoin traded on the platform).

~~~
ShorsHammer
> That's like saying I'm about to buy to Qualcomm because I own a few shares
> in Broadcom

But that's exactly what you are about to do as part owner of Broadcom. I would
certainly say that, this is how equity works.

GS/Circle now have over $200M of Tether liabilities on their books.

Now step back for a moment and ask yourself who has more grasp on the
financials of the situation: The acquisitions team of a half billion dollar
deal or a group of internet commentators?

------
mancerayder
"If you can't beat them, own them."

It will help them perhaps more easily manipulate the market. After all, they
can collect info on all the players' behaviors and predict trends accordingly?
Deploy massive amounts of capital where needed? The possibilities are endless.

------
giles
I wonder if Poloniex will immediately fall under Circle's BitLicense.
Presumably it will, which is good for those wanting to trade in New York
State.

------
TaylorGood
Great article about this acquisition and the emerging world of cryptocurrency
according to the Circle founders:

[http://fortune.com/2018/02/26/circle-cryptocurrency-trade-
bi...](http://fortune.com/2018/02/26/circle-cryptocurrency-trade-
bitcoin/?utm_source=fortune.com&utm_medium=email&utm_campaign=term-
sheet&utm_content=2018022614pm)

------
rl3
On a related note, is cryptocurrency HFT a thing?

As much as I delight in seeing a traditional firms add legitimacy to
cryptocurrency, I can't help but be slightly suspicious when a known HFT
player buys an exchange in a market that's largely unregulated.

Granted, to the best of my knowledge true HFT isn't really possible in the FX
market, and major players there still find a way to make everything a
veritable cesspool.

~~~
philipodonnell
To my knowledge the only way to do true HFT is with co-location, and GDAX
offers co-location via hosting EC2 instances in a certain region. I can get an
offer posted and cancelled in ~150ms (with some fancy race-condition logic
across the websocket and API) which is good, but still nowhere near "HFT".

Competing against someone who bought an exchange and is running an HFT bot on
the same servers, yeah I would stay far away from anyone doing that.

~~~
sitepodmatt
150ms is huge given latency within a EC2 region should be a millisecond or
less, although I suspect this could be working similar to BetFair where they
internally queue and process the orders in a batch every 200/250ms rather than
real time whilst giving the appearance of real time ('taker' being matched
within the first batch since queued).

------
sna1l
Coinbase/GDAX has to be feeling pretty good about this. My personal experience
with Poloniex was abysmal. It took months before I was verified, and the
platform was constantly down and too slow to use.

Coinbase/GDAX isn't perfect by any means, but they do seem to be getting more
stable, while doing 3-4x the volume of Polo.

~~~
tomasien
Coinbase made a billion dollars in 2017 - a literal billion. I don't think
they're thinking much about being acquired anymore....

~~~
Outofthebot
A billion in revenue, not profit, just to be clear. Still nothing to scoff at.

~~~
riku_iki
And are those billions of revenue from customer fees, or amount of all trades
processed by coinbase?

------
DINKDINK
I'm surprised that Circle and by extension Goldman-Sachs would acquire
Poloniex. It was always my relatively unconfirmed belief that, at best,
Poloniex had horrible customer support and infrastructure and at worst was
insolvent and or doing questionable transactions ala BTC-e.

------
vthallam
>Circle’s mobile app lets people make instant money transfers. The company
also has a trading operation, which handles about $2 billion in crypto trading
a month with large institutional buyers and sellers

How does this work now? Like, can you own a large exchange and also trade on
it?

~~~
encoderer
Sure. It’s just an entry in the book. But if they’re doing large orders like
it says, they need to spread across multiple exchanges to ensure best prices.

------
tesrx
The Poloniex press release:

[https://poloniex.com/press-releases/2018.02.26-Poloniex-
join...](https://poloniex.com/press-releases/2018.02.26-Poloniex-joins-
Circle/)

------
allpratik
Surprising!

1\. But does that mean now that Goldman Sach will allow their clients (or
their own internal) to at least allow investment in crypto?

2\. How to know if there are not manipulating the market?

3\. If Poloniex suffers liquidity issues (if USDT is invalidated) then is
Goldman going to take care of the situation?

I genuinely wish now, DEX platforms should be promoted like the one we have
for BitShares. Centralised crypto exchanges are beating the purpose of
decentralization.

------
lostmsu
Funny in the light of Goldman Sachs' statements about the future of
cryptocurrencies [https://www.cnbc.com/2018/02/07/most-cryptocurrencies-
will-c...](https://www.cnbc.com/2018/02/07/most-cryptocurrencies-will-crash-
to-zero-goldman-sachs-says.html)

------
jeofken
What is the legal structure and country of residence of a company such as
Poloniex?

What books or websites should one read to learn about such things?

~~~
cdiddy2
US private LLC registered in Delaware

[https://www.bloomberg.com/research/stocks/private/snapshot.a...](https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=309559982)

------
Scott_Sanderson
Will Polo be the first shitcoin buffet to offer fiat trading pairs?

