Goldman Sachs, the venerated investment banking firm whose chiefs dominate policy and sit on important financial boards in government, may not have jumped into cryptocurrency market.
Chances are, it was pushed.
Wall Street already has a big problem with fear of missing out, or FOMO.
Now it appears that a decision to enter the Bitcoin futures market was driven by investor demand more than thoughtful investment logic.
Testifying before the Commodity Futures Trading Commission, Rana Yared, a managing director at the firm, said customers forced the firm’s hand.
Managing directors are at the top of the investment banking hierarchy.
“The launch of the product by both the Cboe and the CME left us in a very interesting position of having to receive contracts from clients that we ourselves have not made a decision as to how to regard,” Yared said, referring to the decision by the Chicago Board Options Exchange and CME Group to begin trading futures in what has turned out to be a highly volatile asset class.
She hinted that she would prefer to see the exchanges move slower in the future, noting that it is “critical” for firms like Goldman to have time to prepare so they can “risk manage them appropriately.”
Goldman’s early move on crypto seems to indicate that FOMO over potential trading profits will dictate how the firm responds to new products in the future.
For instance, it was always possible for Goldman to tell clients it did not support trading in Bitcoin futures. But, as Yared indicates, the firm was in a position where it couldn’t turn down the business.
Goldman is famous for being long-term greedy. When the firm was a partnership, bankers focused on long-term profits rather than short-term earnings reports.
Thanks to the Internet, earnings pressure and FOMO pressure from Goldman’s own customers, things have changed. Clients can leave any broker behind if the firm can’t meet their needs, however nascent and risk-filled the market.
Goldman now offers access to Bitcoin. Digital currencies will change the financial system over time. They are changing how investment banks operate right now.