
Goldman Sachs to Open a Bitcoin Trading Operation - hapnin
https://nytimes.com/2018/05/02/technology/bitcoin-goldman-sachs.html
======
seibelj
One element I find fascinating about the cryptocurrency / blockchain / ICO
debates on HN and elsewhere is that there are 2 diametrically opposed sides
with passionate advocates. On one side are the boosters that think it is a
great innovation with enormous potential. The other side thinks blockchain is
practically useless, the most overhyped technology ever created, a bubble
never-before seen in history.

Yet every day there are stories (such as this article) showing crypto becoming
more deeply ingrained in mainstream circles. New projects and new companies
are forming consistently, just like with any new disruptive technology. But
some very knowledgable people continue to argue with passion that the entire
technology is a useless fraud!

However this pans out, there are going to be a lot of people on one side that
were totally, completely wrong. I doubt there is much middle ground for this.

~~~
beefield
> However this pans out, there are going to be a lot of people on one side
> that were totally, completely wrong. I doubt there is much middle ground for
> this.

I am starting to have doubts on this one. I mean, I fully admit that _if_
bitcoin ever becomes widely accepted as currency/money, _something_ in my
worldview has been horribly wrong and I need to learn from that. But the other
side can keep on burning fossil fuels worth millions of dollars daily
_indefinitely_ [1] and keep on moving the goalposts and claiming that the
still undefined actual use case that is worth billions of trillions may
actually be just behind the corner. And we likely are beyond the point where
_anything_ could convince cryptocoiners otherwise.[2] I strongly doubt (and
thus cast a challenge to prove _me_ wrong...) cryptocoiners can come up with a
clearly defined possible future event (or lack of event) that would
irrefutably prove them wrong.

[1] Well, of course not indefinitely, there are things like the sun turning to
a red giant and the Big Freeze of the universe that may cause some hiccups
there, but indefinitely for the purpose of this analysis.

[2]
[https://en.wikipedia.org/wiki/When_Prophecy_Fails](https://en.wikipedia.org/wiki/When_Prophecy_Fails)

~~~
csomar
How old are you? The young are embracing crypto-currencies. The only guys that
I see holding this back are 35+ and particularly 45+. Who, obviously, do have
the wealth to move crypto to higher valuation.

There is nothing wrong with your worldview. You don't have the correct
worldview, you'll never will and no one will. The world is complex and
chaotic.

~~~
MrEldritch
Speaking as a young person (22), I'm certainly not embracing cryptocurrencies
and neither is anyone I know. Bitcoin is virtually useless as a currency[1]
and, having no other compelling use-case whatsoever, cannot really be a store
of value either. (Lightning network may change that, but that also amounts to
totally replacing almost all of Bitcoin by building a hopefully less shitty
system on top of it. Lightning being necessary means that Bitcoin as Satoshi
envisioned it has failed utterly.)

Ethereum strikes me as basically a gimmick, and the constant calls for forks
as some completely immutable smart contract gets irrevocably fucked up and the
only option is to roll back the whole damn blockchain does not strike me as a
problem that is even fixable; smart contracts just don't seem to be a good
idea. It also seems terribly inefficient as a computing platform and unlikely
to scale well.

I don't deny that the dream of decentralized, fast, low-transaction-cost,
disruptive payment infrastructure would be groundbreaking if it could be
achieved without instantly breaking due to scaling problems and wild
speculation. But I'm not convinced that blockchain is even remotely the right
tool to deliver it.

[1] Admittedly, not as useless as it was a couple months ago, when average
transaction time would randomly spike through the roof and transaction fees
were insane. But it seems like the reason that happened is not because
problems were fixed, but because people moved away from Bitcoin and eased
pressure on the creaking system. Bitcoin works only when people aren't trying
to use it.

~~~
scalesolved
Why does a store of value need a compelling use-case? If you hold millions in
gold it's most likely in a vault doing nothing except taking up space and
storage costs alongside it's primary use case of being a store of value.

~~~
MrEldritch
It needs to be useful for something other than just "being a store of value".
Gold 'works' as well as it does because there's at least _something_ tying it
down to market fundamentals. You can make jewelry out of it, you can coat
electrical contacts with it. There's reasons besides collective psychology
that gold is worth something particular which isn't $0.

A digital asset like Bitcoin has nothing tying it down to market fundamentals
at all unless there's something else to do with it. It's a disconnected number
flapping about in the wind. And as we've observed, since the value people
ascribe to a Bitcoin is entirely psychological, the price can do _anything._
I'm not storing my value in anything I can't be fairly certain will have
similar or greater value in the future. A Bitcoin that could be used as a
currency would have some inherent value, because _being able to use something
as currency is valuable._

Something has to be at least a _little_ useful for its value to be reliable.
(Having a trusted organization, which you expect to be around for a long time,
that promises to exchange it for something useful counts as being useful
itself.)

~~~
scalesolved
> Gold 'works' as well as it does because there's at least something tying it
> down to market fundamentals. You can make jewelry out of it, you can coat
> electrical contacts with it.

In the earlier phases of Gold as a store of value I'd agree that it having
additional uses were a bonus but now when an institution be it private or
governmental purchases millions of gold as assets for a SoV then this usage is
inconsequential.

Gold used to be volatile but now is a stable store of value, it retains this
because the market decides a fair price, gold can theoretically go to zero,
it's just had hundreds of years to achieve a more stable price/value.

> since the value people ascribe to a Bitcoin is entirely psychological

This is totally true of gold too, it's just embedded more into society as an
element that has value.

> A Bitcoin that could be used as a currency would have some inherent value,
> because being able to use something as currency is valuable

It's cheaper and faster for me to send BTC between US/EU, volatility is an
issue of course.

> Something has to be at least a little useful (or else backed up by a trusted
> organization) for its value to be reliable.

I'm not sure many of the 'trusted' organizations are that trustworthy, look at
the 2007 crash, massively over leveraged assets with complex rules/instruments
and collusion (that resulted in the UK with no one being prosecuted).

There a few ways where I see BTC having an advantage as a SoV over gold.

* Portability (transferring any amount of BTC is limited only by transaction cost).

* Scarcity (The number of BTC is capped at 21 million ever on the network, gold will still be found and mined).

* Divisible (BTC can be divided to small amounts that would make it more useful for smaller purchases where gold is not practicable).

~~~
MrEldritch
>In the earlier phases of Gold as a store of value I'd agree that it having
additional uses were a bonus but now when an institution be it private or
governmental purchases millions of gold as assets for a SoV then this usage is
inconsequential.

Nearly _70%_ of the demand for gold is for jewelry, electronics, and other
non-financial/SoV applications. The market value of gold is _dominated_ by its
practical and aesthetic uses.

[https://www.statista.com/statistics/299609/gold-demand-by-
in...](https://www.statista.com/statistics/299609/gold-demand-by-industry-
sector-share/)

~~~
scalesolved
Super interesting, thanks for the link!

It looks to be dropping though:
[https://www.economist.com/node/16536800](https://www.economist.com/node/16536800)

>The market value of gold is dominated by its practical and aesthetic uses.

Should we really consider aesthetics here? Practical use cases within
technology I can totally value.

~~~
MrEldritch
Well, 30% of the market value of gold _is_ from financial/SoV-type use cases!
That's not insignificant. Because of the psychological consensus that gold is
a decent place to store value - it's been one for several thousand years, you
can reasonably assume that someone's still going to take it a few decades from
now - that portion of its value fluctuates substantially depending on how
interested people are in a literally solid and relatively-stable physical
asset. So when people are uncertain about other investment prospects, they go
to gold, because it's basically one step up from stuffing cash under your
mattress insofar as gold is less subject to inflation.

Crypto is ... currently, at least, not where you go if you want something with
a reliable, stable value.

And yeah, I think aesthetic value counts! It's also very much a psychological
thing, and it's undeniably tied into a similar "I think this is valuable
because other people will see it and think it looks valuable" loop; if gold
were much cheaper, we wouldn't see as much gold jewelry. But it's also
genuinely one of the better metals to make jewelry out of (doesn't corrode,
ductile, nobody's allergic to it) and it's quite a pretty color. It's more
fickle than industrial use, sure, but it's also much _less_ fickle than
investor speculation.

------
jjxw
Sounds like a reasonable operation to set up. Goldman is ostensibly in the
business of selling shovels in a gold rush so if enough of their clients are
demanding a product that gives then exposure to bitcoin then Goldman senses
there's money to be made here in fees.

~~~
atomical
They probably feel they have an edge trading against the typical crypto
trader.

~~~
keyle
Well they certainly do, the 'market' is very inefficient.

~~~
atomical
I doubt they are interested in providing liquidity for an unproven technology
and currency though.

------
pembrook
Re: Goldman’s activity pumping and dumping IPO’s they knew to be worthless to
screw over retail investors during the late 90s tech bubble.

Read Matt Taibbi’s hyperbolic yet mostly accurate Rolling Stone article for
more info.

It’s safe to assume Goldman isn’t neccesarily getting into bitcoin because it
believes in the technology.

~~~
klipt
They believe it will make them money, which is all they care about.

Bitcoin probably won't cure cancer, but Goldman isn't in the business of
curing cancer anyway...

~~~
ISL
They would be if they knew how, as would almost anyone else.

~~~
klipt
Not really? There are professional oncology researchers out there but they
work at universities, research hospitals, and pharma companies, not finance
companies like Goldman.

------
joejerryronnie
Goldman Sachs is not opening a bitcoin trading operation because they believe
in the legitimacy of blockchain tech. The only reason Goldman is doing this is
because they smell money and realize that jumping into a bubble can net them
hundreds of millions/billions of dollars in profit. They are not going to make
money from buying bitcoin, they are going to make money in fees they charge
other large clients to buy/sell/hedge/etc bitcoin. They'll also create some
exotic bitcoin-based financial instruments that nobody can understand but will
sell to pension funds for gobs of money.

Will blockchain revolutionize tech and business in general? Will a Bitcoin be
worth a million bucks some day? Will crypto replace traditional currency? I
don't know - but I guarantee that is not the angle Goldman is playing here.

~~~
d0ugie
Goldman is experimenting, not smelling big bucks. Other firms, namely
JPMorgan, won't touch bitcoin for the same reasons they train every employee
over and over how to stay away from money laundering red flags. Banks have
populist targets on their backs, getting involved with Bitcoin elevates the
bright redness of those targets. But Goldman is uniquely smart and I'm
intrigued. Guess I'll add them as a custom Google News section...

~~~
joejerryronnie
Goldman is very smart but they are also willing to throw ethics out the window
and put huge swaths of society at financial risk if they can capitalize on it.
I like them as an investment but they are kind of the epitome of capitalism's
worst excess.

------
21
Imagine that the year is 2011, Bitcoin appears for one of the first times on
HN, and someone says "in the future Goldman will trade bitcoin". Ha ha ha ha
ha....

Today, someone (me) says: in the future, first world central banks will hold
bitcoin as a reserve among the usual things (dollars, euros, gold, ...)

~~~
lmm
In 2011 I was saying "the only thing Bitcoin is actually useful for (as in
better than the alternatives) is buying drugs", and people assured me that
actually useful applications were just around the corner.

7 years on, the only thing Bitcoin is actually useful for (as in better than
the alternatives) is buying drugs.

~~~
jokes_on_you
How it must feel to have had enough awareness of bitcoin in 2011 that you felt
qualified to make offhand snide comments about it then 7 years later wake up
and realize you could have been a centi-millionaire if only you'd been a
little less cynical. The r/buttcoin subreddit was made in 2011 or 2012. I
sometimes wonder if some of the original posters haven't thrown themselves out
of a window by now.

edit: And in come the down votes. Cognitive dissonance is a cruel mistress.

~~~
zimablue
I heard of bitcoin pretty early on in /b/ and have no regrets. I also don't
regret that I wasn't alive to cash out at the right time on tulips or penny
stocks or dot com companies, or even stuff which turned out to stick around
like Apple.

There are lots of places to gamble and lots of people winning and losing all
the time, much more often through luck than genius. If some of those people
end up fantastically wealthy and rather smug about it it's definitely not the
biggest problem for me or my ego.

People who become fantastically successful through skill, determination and
creativity, they're a bit more bruising.

~~~
jokes_on_you
>I also don't regret that I wasn't alive to cash out at the right time on
tulips or penny stocks or dot com companies, or even stuff which turned out to
stick around like Apple.

Begging the question of whether tulip mania is even relevant in this context,
were you going around at the beginning of it or when Apple got listed making
snide comments? Yeah. Thought not. But then again, this is """Hacker""" News
so critical thinking isn't exactly what anyone would expect. For instance, a
significant fraction of this thread is debating whether Goldman Sachs
"believes" in Bitcoin. What? Who cares. The significance of them opening a
trading desk is people who like to do their gambling with them can now buy
Bitcoins. More buyers, more sellers, more volume. But carry on having no
regrets.

Oh and, nice cope.

------
partycoder
There might be many bad aspects about cryptocurrencies.

But they don't have to be perfect, they just need to be better than what
currently exists.

ACH and SWIFT are, at their very best, mediocre and sad when technologically
compared to blockchain.

In fairness though, if all transactions made it into a blockchain, fewer and
fewer people would be able to store it in their computers, let alone process
it.

~~~
pedrocr
>ACH and SWIFT are, at their very best, mediocre and sad when technologically
compared to blockchain.

Quite the contrary. Modern banking transfer technologies are _much_ better
than Bitcoin at what they do. They're orders of magnitude more energy
efficient and also much faster than waiting for blockchain confirmation of
transactions. Banks are usually quite bad at exposing that functionality to
clients but the actual technology beats Bitcoin easily. That's not even
surprising. Sending a few messages over the internet and updating a couple of
database registers is massively simpler than running a distributed PoW ledger.

~~~
Chris_Jay
I want to know where you bank.

~~~
pedrocr
"Banks are usually quite bad at exposing that functionality to clients"

And here are those technologies properly exposed:

[https://play.google.com/store/apps/details?id=pt.sibs.androi...](https://play.google.com/store/apps/details?id=pt.sibs.android.mbway&hl=en_US)

Immediate transactions between individuals in the traditional banking system.

------
ashelmire
This was news in the fall, wasn’t it? Trying to renew the hype it seems.
[https://www.bloomberg.com/news/articles/2017-12-21/goldman-i...](https://www.bloomberg.com/news/articles/2017-12-21/goldman-
is-said-to-be-building-a-cryptocurrency-trading-desk)

------
rajacombinator
Where there are muppets ...err clients ... to be fleeced, Goldman will be
there!

------
nikolay
So Bitcoin is anything but it was it was supposed to be. And I wonder why
people still care about this scam!

~~~
DINKDINK
>Bitcoin is anything but it was it was supposed to be

Bitcoin was suppose to be an open, peer-to-peer, decentralized, self-sovereign
value transfer network. After GS facilitates BTC trades, bitcoin will be an
open, peer-to-peer, decentralized, self-sovereign value transfer network.

------
bunkydoo
Goldman Sucks

~~~
dang
Maybe so, but please don't post unsubstantive comments here.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
known
Can Blockchain replace Fed?

~~~
sjwright
No, because there is always a need for artificially stabilised currency. When
you bought lunch today, you know you weren't being ripped off because $10 is
worth the same as yesterday, and roughly the same as when you earned it a few
months ago.

~~~
anonytrary
> No, because there is always a need for artificially stabilised currency.

This is a mathematical assertion and requires a proof.

~~~
sjwright
No, it's a musical assertion and requires lyrics.

That's how dumb you sound.

~~~
anonytrary
> That's how dumb you sound.

This is HackerNews, not Reddit; comments like this are typically ignored. You
are claiming that all currencies require active stabilization; that a currency
is unstable without outside intervention. Where's the economics that supports
your claim? You can cite it, if you want. Your retort regarding music is
irrelevant, and it looks like you missed my point.

Instead of writing a paragraph, I observed that you are "making an inherently
theoretical claim which you haven't backed up". Why do you believe
intervention is required for stability? Do you have a theory; can you cite a
theory? I'm not sure why the question was confusing to you, nor why you took
it as an offense. I'm sure other people would love to hear you justify your
socialist, "hands-on" viewpoint.

~~~
sjwright
If you don't agree with the assertion, that's fine. Convincing you is not a
productive use of my time. Ask your nearest high school economics teacher to
explain it to you.

~~~
anonytrary
Replying is not worth it for you.

~~~
sjwright
I don’t believe for a second you actually hold the contrary view.

~~~
anonytrary
Or perhaps it is...

~~~
sjwright
Found that teacher yet?

------
BigChiefSmokem
The mighty USD is going to have a rough time going up against the Yuan (and
the Silk Road) and Bitcoin to be crowned as the new global standard.

~~~
bcheung
Always bet on the US banking industrial complex securing its interests by
whatever means necessary.

All of this has happened before and will happen again.

[https://en.wikipedia.org/wiki/Executive_Order_6102](https://en.wikipedia.org/wiki/Executive_Order_6102)

~~~
anonytrary
This is... appalling and depressing.

