Listen, Lloyd Blankfein needs you to understand something about yesterday’s Wall Street Journal article which revealed that Goldman Sachs is pondering whether to divert resources from its FX unit to build a Bitcoin trading operation. Specifically, here’s what Lloyd needs you to get through your thick skull:
Right. He’s “still thinking” about whether this is a good idea and the fact that he’s “thinking” about it in the first place doesn’t amount to an “endorsement.”
Of course this is a nebulous tweet (maybe Jamie tapped in on the shoulder). The only thing Goldman is “thinking” about here is whether or not the profits to be had from diving head first into an “asset” where there’s all kinds of volatility outweigh whatever reputational damage would accrue to the firm when something invariably goes wrong.
As we noted on Tuesday – and our sentiments on this were immediately backed up by others – there is one motivation for this. Here’s what we said:
Goldman is going to try and prove that they’re still “the smartest guys in the room” (and not in that Enron kind of way) by being first to the party and making a fortune at a time when the bank’s commodities business is in turmoil and its FI business is similarly struggling.
One way to right the ship might well be to get moving on something that actually moves. And as JPMorgan’s Marko Kolanovic noted in his Bitcoin piece last month, “bitcoin volatility is ~100%, or ~15 times the average currency volatility.”
As for Lloyd’s assertion that “people were skeptical when paper money displaced gold,” I suppose we would say this: “yeah, and look how that turned out.” We live in a world that’s awash with pyramided debt and worthless scrip.
So again, this isn’t a decision about the relative merits of the crypto revolution. This is a decision about Goldman’s trading revenue.
