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They typically do this for a few reasons: 1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don

They typically do this for a few reasons: 1. High net worth clients demanding such products. 2. Obvious FOMO. 3. In case this crypto thing becomes big they don’t want to be criticized. 4. All companies are seeing a nice bump in their share prices with any association to crypto

frgtpsswrdlame 9y ago
HNWIs are definitely starting to talk about and ask for crypto products. EDIT: I work in the area, not a shill.
- charlesdm 9y ago
  Best performing asset class over the last few years. Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy..
  - frgtpsswrdlame 9y ago
    Well actually that's not what we advise but we're not GS either. >Best performing asset class over the last few years. Previous performance is not a predictor. >Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy If it's a bubble it's a terrible idea to allocate a few percentage points to it.
    - AznHisoka 9y ago
      "If it's a bubble it's a terrible idea to allocate a few percentage points to it." Why? The word 'bubble' has negative connotations, but the flip side is the only opportunity of a great multiplier on your investment in a short time is during a bubble. Caveat of course, you can lose a lot of money, but that's why you allocate 1% of your portfolio so you can still survive.
      - workthrowaway27 9y ago
        Because when a bubble bursts money has just been moved around but there's no net increase in wealth. Expected value is close to zero.
        charlesdm 9y ago
        Which is why you need to have a clear exit point, not keep your money in forever. Fortunes were made (but also lost) during the dot-com bubble.
        AnimalMuppet 9y ago
        Yeah, but now you're trying to time the market. That's... a less than optimal strategy.
        AznHisoka 9y ago
        Of course, you need to rely on luck in a bubble. There's never any guaranteed returns in anything with a possibility of a high return.
        vkou 9y ago
        If Bitcoin were to crash, you wouldn't be able to exit. The exchanges would be overloaded, the price would collapse while you[1] can't trade, and you may also discover that some of the exchanges have stolen your money because they are insolvent. [1] Although some whale customers may be able to. They may win big - or at least, lose less, at your expense.
        refurb 9y ago
        Exactly this. During the subprime crisis, even the big banks couldn't offload their risk. It's crazy to think an amateur investor in Bitcoin is going to be able to "keep the exits clear". By the time you see the downturn those exits are long gone.
    - AnimalMuppet 9y ago
      To expand on this a bit: I recall seeing that, if at the end of each year, you moved your money into the mutual fund that had the highest return during that year, in the next year you would have averaged -40% returns. Negative 40%. Yeah, this isn't a mutual fund. Yeah, it's not directly applicable. But chasing previous returns is a way to lose money, not gain it.
    - enraged_camel 9y ago
      >>If it's a bubble it's a terrible idea to allocate a few percentage points to it. If I had $100 million, I wouldn't have any issues with investing $2-3 million in Bitcoin just for shits and giggles. The idea is that when you have boatloads of money, you don't have to be risk-averse, as the marginal utility of each dollar you have is very low.
  - notyourday 9y ago
    Rubbish. The best performing asset class is cocaine. Buy leaves from the growers, process, sell to the red carpet users. Thousands percent every year.
    - seanmcdirmid 9y ago
      After watching the educational documentary “Breaking Bad”, meth seems a lot more profitable: you can by the inputs legally and all you need to do is some cooking. Getting rid of the logistics of import is surely a money saver.
cantrip 9y ago
This kind of covers every conceivable case for doing this. If you list enough reasons you're bound to be right on one of them.
- tw1010 9y ago
  It's only four items. I appreciated the enumeration.
- philwelch 9y ago
  It covers the sober and reasonable cases. I think the main thing this enumeration does is to provide alternatives to the hyperbolic notion of “cryptocurrency/blockchain is taking over the world and even the big investment banks are going in on it”, with either the bullish “this means it’s a real economic revolution” or the bearish “this means we’re at the peak of the bubble and the big banks are losing their minds and threatening the world economy again” subtexts to it.
deleted 9y ago
[deleted]
headmelted 9y ago
Mostly I think it's 1. A lot of people jump on guys like Jamie Dimon and Lloyd Blankfein for calling Bitcoin massively volatile / a bubble / whatever, like they hate cryptocurrencies. They don't care, and they aren't supposed to. Their business is to sell whatever the customer wants to buy, cheaper or easier than they can get it elsewhere - and right now the customer wants to buy Bitcoin. Who cares if the backside falls out of it later?
- 52-6F-62 9y ago
  Don't forget Jamie Dimon's company is founding their own blockchain for transactions, Quorum. https://www.jpmorgan.com/global/Quorum https://www.jpmorgan.com/global/Quorum
  - fitchjo 9y ago
    Finding a use for the underlying technology supporting bitcoin is very different than saying bitcoin as a fiat currency is worth the value at which it is currently trading.
    - 52-6F-62 9y ago
      Undoubtedly. My comment was only meant to frame that he may have a vested interested in lambasting one implementation of the tech while promoting his own, and that he wasn't merely acting as informed commentator. He can't be merely a skeptic when he's selling his own version to some of the largest banks in the world.
    - mulmen 9y ago
      I'm not a financial expert but I thought the value proposition of Bitcoin is that it is not a fiat currency.
      - spenczar5 9y ago
        That's a strange thing to say. I think of a "fiat currency" being one which 1. is not backed by a physical good, like gold, and 2. is recognized by a government, so you can pay taxes and fines with it. Why would it be beneficial that you cannot pay your taxes with Bitcoin?
deleted 9y ago
[deleted]
workthrowaway27 9y ago
They are just making markets, so it's sort of 1 and 2. I say sort of because it means clients want to trade cryptocurrencies. They aren't necessarily high net worth individuals though. My guess is most clients are institutional, though it might be different with people wanting to trade cryptocurrencies. It's FOMO if you think not wanting to lose money to your competitors is FOMO. I'd say it's more just performing one of their job functions. I doubt they care about being criticized and until GS releases Goldman Coin I doubt they're trying to get a share price bump from this.
- twic 9y ago
  It's not entirely clear to me whether "making markets" means on exchanges, or over the counter. The term normally means on an exchange; over the counter, you're a dealer rather than a market maker. If it's on exchanges, then it has nothing to do with high net worth clients, or any other kind of client, because they won't be trading with their clients specifically, they'll be trading with other market participants. if it's OTC, then it could be part of a package of services for clients. That would still a bit weird, though, because a bank would normally act as a broker rather than a dealer for its clients - going to the market and finding them the best price, rather than making its own price. I think that their reason is much simpler: they think they can make money doing it. I guess you could call that FOMO. But basically, they think that with their trading instincts, technology, and famously huge brains, they can move their prices around so that they can buy low and sell high without getting, as we say in the trade, their faces ripped off.
  - kgwgk 9y ago
    Dealers act as market makers quoting bid and ask prices, don’t they?
    - twic 9y ago
      It's fundamentally the same thing, yes - showing bid and offer prices at which you will get into risk on your own account. But the term "market maker", in my limited experience, usually means on an exchange, whereas it's "dealer" over the counter. For example, you have swap dealers, but futures market makers.
indescions_2017 9y ago
Also. This past year to date has evinced all time historical low volatility in major currency crosses. Difficult to make the case based on sheer volume that fiat is being abandoned for crypto. But players hunting for alpha tend to go where the action is: Traders Lament Death of FX Volatility as Torpor Tanks Returns https://www.bloomberg.com/news/articles/2017-12-10/traders-lament-death-of-fx-volatility-as-torpor-tanks-returns https://www.bloomberg.com/news/articles/2017-12-10/traders-l...

frgtpsswrdlame 9y ago

HNWIs are definitely starting to talk about and ask for crypto products. EDIT: I work in the area, not a shill.

charlesdm 9y ago
Best performing asset class over the last few years. Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy..
- frgtpsswrdlame 9y ago
  Well actually that's not what we advise but we're not GS either. >Best performing asset class over the last few years. Previous performance is not a predictor. >Even if it is a bubble, you might as well allocate a few %'s of your portfolio to it if you're wealthy If it's a bubble it's a terrible idea to allocate a few percentage points to it.
  - AznHisoka 9y ago
    "If it's a bubble it's a terrible idea to allocate a few percentage points to it." Why? The word 'bubble' has negative connotations, but the flip side is the only opportunity of a great multiplier on your investment in a short time is during a bubble. Caveat of course, you can lose a lot of money, but that's why you allocate 1% of your portfolio so you can still survive.
    - workthrowaway27 9y ago
      Because when a bubble bursts money has just been moved around but there's no net increase in wealth. Expected value is close to zero.
      - charlesdm 9y ago
        Which is why you need to have a clear exit point, not keep your money in forever. Fortunes were made (but also lost) during the dot-com bubble.
        AnimalMuppet 9y ago
        Yeah, but now you're trying to time the market. That's... a less than optimal strategy.
        AznHisoka 9y ago
        Of course, you need to rely on luck in a bubble. There's never any guaranteed returns in anything with a possibility of a high return.
        vkou 9y ago
        If Bitcoin were to crash, you wouldn't be able to exit. The exchanges would be overloaded, the price would collapse while you[1] can't trade, and you may also discover that some of the exchanges have stolen your money because they are insolvent. [1] Although some whale customers may be able to. They may win big - or at least, lose less, at your expense.
        refurb 9y ago
        Exactly this. During the subprime crisis, even the big banks couldn't offload their risk. It's crazy to think an amateur investor in Bitcoin is going to be able to "keep the exits clear". By the time you see the downturn those exits are long gone.
  - AnimalMuppet 9y ago
    To expand on this a bit: I recall seeing that, if at the end of each year, you moved your money into the mutual fund that had the highest return during that year, in the next year you would have averaged -40% returns. Negative 40%. Yeah, this isn't a mutual fund. Yeah, it's not directly applicable. But chasing previous returns is a way to lose money, not gain it.
  - enraged_camel 9y ago
    >>If it's a bubble it's a terrible idea to allocate a few percentage points to it. If I had $100 million, I wouldn't have any issues with investing $2-3 million in Bitcoin just for shits and giggles. The idea is that when you have boatloads of money, you don't have to be risk-averse, as the marginal utility of each dollar you have is very low.
- notyourday 9y ago
  Rubbish. The best performing asset class is cocaine. Buy leaves from the growers, process, sell to the red carpet users. Thousands percent every year.
  - seanmcdirmid 9y ago
    After watching the educational documentary “Breaking Bad”, meth seems a lot more profitable: you can by the inputs legally and all you need to do is some cooking. Getting rid of the logistics of import is surely a money saver.

cantrip 9y ago

This kind of covers every conceivable case for doing this. If you list enough reasons you're bound to be right on one of them.

tw1010 9y ago
It's only four items. I appreciated the enumeration.
philwelch 9y ago
It covers the sober and reasonable cases. I think the main thing this enumeration does is to provide alternatives to the hyperbolic notion of “cryptocurrency/blockchain is taking over the world and even the big investment banks are going in on it”, with either the bullish “this means it’s a real economic revolution” or the bearish “this means we’re at the peak of the bubble and the big banks are losing their minds and threatening the world economy again” subtexts to it.

deleted 9y ago

[deleted]

headmelted 9y ago

Mostly I think it's 1. A lot of people jump on guys like Jamie Dimon and Lloyd Blankfein for calling Bitcoin massively volatile / a bubble / whatever, like they hate cryptocurrencies. They don't care, and they aren't supposed to. Their business is to sell whatever the customer wants to buy, cheaper or easier than they can get it elsewhere - and right now the customer wants to buy Bitcoin. Who cares if the backside falls out of it later?

52-6F-62 9y ago
Don't forget Jamie Dimon's company is founding their own blockchain for transactions, Quorum. https://www.jpmorgan.com/global/Quorum https://www.jpmorgan.com/global/Quorum
- fitchjo 9y ago
  Finding a use for the underlying technology supporting bitcoin is very different than saying bitcoin as a fiat currency is worth the value at which it is currently trading.
  - 52-6F-62 9y ago
    Undoubtedly. My comment was only meant to frame that he may have a vested interested in lambasting one implementation of the tech while promoting his own, and that he wasn't merely acting as informed commentator. He can't be merely a skeptic when he's selling his own version to some of the largest banks in the world.
  - mulmen 9y ago
    I'm not a financial expert but I thought the value proposition of Bitcoin is that it is not a fiat currency.
    - spenczar5 9y ago
      That's a strange thing to say. I think of a "fiat currency" being one which 1. is not backed by a physical good, like gold, and 2. is recognized by a government, so you can pay taxes and fines with it. Why would it be beneficial that you cannot pay your taxes with Bitcoin?

deleted 9y ago

[deleted]

workthrowaway27 9y ago

They are just making markets, so it's sort of 1 and 2. I say sort of because it means clients want to trade cryptocurrencies. They aren't necessarily high net worth individuals though. My guess is most clients are institutional, though it might be different with people wanting to trade cryptocurrencies. It's FOMO if you think not wanting to lose money to your competitors is FOMO. I'd say it's more just performing one of their job functions. I doubt they care about being criticized and until GS releases Goldman Coin I doubt they're trying to get a share price bump from this.

twic 9y ago
It's not entirely clear to me whether "making markets" means on exchanges, or over the counter. The term normally means on an exchange; over the counter, you're a dealer rather than a market maker. If it's on exchanges, then it has nothing to do with high net worth clients, or any other kind of client, because they won't be trading with their clients specifically, they'll be trading with other market participants. if it's OTC, then it could be part of a package of services for clients. That would still a bit weird, though, because a bank would normally act as a broker rather than a dealer for its clients - going to the market and finding them the best price, rather than making its own price. I think that their reason is much simpler: they think they can make money doing it. I guess you could call that FOMO. But basically, they think that with their trading instincts, technology, and famously huge brains, they can move their prices around so that they can buy low and sell high without getting, as we say in the trade, their faces ripped off.
- kgwgk 9y ago
  Dealers act as market makers quoting bid and ask prices, don’t they?
  - twic 9y ago
    It's fundamentally the same thing, yes - showing bid and offer prices at which you will get into risk on your own account. But the term "market maker", in my limited experience, usually means on an exchange, whereas it's "dealer" over the counter. For example, you have swap dealers, but futures market makers.

indescions_2017 9y ago

Also. This past year to date has evinced all time historical low volatility in major currency crosses. Difficult to make the case based on sheer volume that fiat is being abandoned for crypto. But players hunting for alpha tend to go where the action is: Traders Lament Death of FX Volatility as Torpor Tanks Returns https://www.bloomberg.com/news/articles/2017-12-10/traders-lament-death-of-fx-volatility-as-torpor-tanks-returns https://www.bloomberg.com/news/articles/2017-12-10/traders-l...