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Screenshot of a breaking news alert e-mail from Q2 2017
After bitcoin futures launched on December 10th, Bitcoin’s price has skyrocketed to new levels of almost $18,000. Now, probably the most influential and well-respected investment bank in the world, Goldman Sachs, is trying to set a 100% margin on some bitcoin futures.
As the CEO of Goldman, Lloyd Blankfein has said many times that he is in two minds about bitcoin and all the hype related to it. However, as the brokerage arm of the bank realises the huge demand for bitcoin and bitcoin derivatives, Goldman is finally open to bitcoin futures, but at a price for its clients. What the margin requirement means is that investors who seek to trade in bitcoin futures, need to have 100% of the invested money aside to be allowed to transact with the product.
A similar undertaking was made by Interactive Brokers, who did now allow shorting and required a 100% margin on bitcoin futures. In both cases, what this requirement means for the bank is complete assurance that if something goes wrong, and in case of a 100% loss, the bank is covered in full.
According to Tyler Durden from Zero Hedge, by requiring a margin of 100%, Goldman’s clients may as well be trading the underlying as there is zero leverage on the associated futures position; effectively, the only benefit from doing such a trade is giving Goldman the “privilege” of holding the bitcoin and keeping it safe from hackers’ prying hands. Those clients, whom will be required to put such a margin are probably those who plan to short it.
With the price of Bitcoin slumping a little this week, and with the new futures by CME Group launching on 17th December, it is interesting to see where “bulls” and “bears” on bitcoin will put their funds and whom they will trust from the big brokerage companies and investment banks. And while some are trying to increase leverage on bitcoin futures, others, like Goldman, are essentially wiping it out.