With the entry of major banks and financial institutions such as Goldman Sachs into the cryptocurrency market, the liquidity, as well as the price of bitcoin, will surge!!
Goldman Sachs Group reportedly is looking forward to entering the world of bitcoin trading. According to Jon Matonis, a co-founder of Bitcoin Foundation and executive at VISA, if major banks and financial institutions such as Goldman Sachs enter the market, the liquidity, as well as the price of bitcoin, will surge!!
The cryptocurrency market is prone to volatility with sudden price fluctuations due to lack of liquidity. After a major correction which occurred in January of 2018, the market has suffered a setback with substantial shrinking of the daily trading volume and also the price of bitcoin. Other major cryptocurrencies have also obviously followed bitcoin, rather some have taken much larger drops in price than bitcoin itself. As a result of dropping daily volume of bitcoin, apparently whales and institutional investors in the futures market are able to manipulate the market more easily.
Matonis avers, “I think it’s fabulous that they’re getting into it because it brings in new liquidity. They’re going to develop futures markets, options markets, I even think you’re going to start to see interest rate markets around bitcoin. We’re used to hearing things about Libor, the index for bitcoin interest rates is Bibor.”
The cryptocurrency market will see more institutional and retail traders coming into the scene, once large financial institutions of the likes of Goldman Sachs enters the crypto space. It is noteworthy that the Chicago Board Options Exchange (Cboe) has recently projected to the US Securities Exchange Commission (SEC) to permit bitcoin exchange-traded funds (ETFs) on US stock markets like the New York Stock Exchange (NYSE) and Nasdaq.
A huge amount of money is invested in cryptocurrencies by the institutional investors in Japan through trading platforms that particularly deal with retail traders. In the United States, the share of the public finance industry is almost negligible; however, the demand from institutional investors is comparatively much high.
Matonis believes that bitcoin is not a bubble; in fact, the equity markets and bond markets are multi-trillion dollar bubbles that would certainly burst.
“To the people who say bitcoin’s a bubble, I would say bitcoin is the pin that’s going to pop the bubble. The bubble is the insane bond markets and the fake equity markets that are propped up by the central banks. Those are the bubbles,” he said.
As of now, it remains unclear when major financial institutions will make a move to enter the market. Considering the market slump, financial institutions will not make a hasty move, however, they may take an early step only if they intend to keep themselves ahead of their competitors in cryptocurrency development. Once major banks enter the market, which is expected over the next few months, the cryptocurrency market will have improved liquidity and public investment vehicles.
Over the past few months, the mainstream media has portrayed and likened trading in cryptocurrency market to gambling. However, once the sentiment in the cryptocurrency market turns and starts gaining momentum, the financial institutions will have to take into consideration the increasing demand in this space and prepare accordingly.
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