Goldman Sachs is the most powerful investment bank in the world. It has total assets of more than $ 1 trillion and its senior managers have played an important role in both Republican and Democrat administrations. For example, its former CEO Hank Paulson served as Obama’s Treasury Secretary while its former president, Gary Cohn, served as Trump’s Chief Economic Advisor.
A few months ago, the bank announced that it was exploring forming a trading desk for cryptocurrencies. This was big news for cryptocurrencies traders because of the role Goldman plays in the American and global economy. Its clients include hedge funds, institutional investors, and high net-worth individuals. Therefore, an entry into the crypto industry would have increased demand from these entities. This is because these entities don’t deal with the normal retail exchanges because they are not sophisticated and tested enough.
Yesterday, a report by Business Insider said that Goldman was abandoning the push into cryptocurrencies. This was a major blow to cryptocurrencies enthusiast. It was also an indication that the planned entry into cryptocurrencies by other large Wall Street firms like Blackrock was now in doubt.
This led the price of Bitcoin to fall from an intraday high of above $7,300 to a low of $6,100. More of these declines will likely continue as more negative news cloud the industry. The market capitalization of the cryptocurrencies tracked by Coin Marketcap dropped from $220 billion to the current $200 billion. YTD, the valuation has dropped from more than $800 billion. This made the cryptocurrencies the most valuable ‘companies’ after Apple Amazon, and Google.
This year, Bitcoin has experienced major challenges. At the beginning of the year, the regulatory concerns clouded the market when Japan and South Korea announced fresh regulations. This was followed by the private sector bans by Google, Facebook, Microsoft, and Twitter. It was followed by the rejection of the proposed Exchange Traded Funds (ETF) by the Securities and Exchange Commission (SEC). They have also been clouded by the cryptocurrencies hackings that have happened and the increased short sellers who placed their bets on their collapse.
The value of Bitcoin to holders has almost disappeared. It was built as a secure replacement of currency but the recent hackings has eliminated this role. It was built as a less expensive currency but the price of mining has become unsustainable to many traders. It was built to be an anonymous means of exchange but regulators have managed to track some transactions. In the United States, the special counsel is investigating a Russian person who sent money using Bitcoins.
These problems have also been experienced in the Ethereum market. The price of Ethereum has dropped sharply this year reaching $216. This is the lowest level this year. Just this week, an expert on cryptocurrencies published an article in TechCrunch saying that the value of Ethereum could go down to zero. The founder of Ethereum responded to the article saying that the Ethereum network needed to change for it to survive.