Goldman Sachs isn’t a Bearish Indicator for the BTC Marketplace


The Bitcoin marketplace is not the same place it was in 2017 when Goldman Sachs was against the idea of launching its own crypto trading desk.

Peter Brandt, a prominent expert trader and Chef Executive Officer of the trading frmm Factor LLC, not that long ago shred his thoughts on Goldman Sachs’ ability to restart its crypto trading desk.

On Dec. 21, 2017, a kindred piece from Bloomberg reported that Goldman Sachs would make a crypto desk. This was despite the financial entity still attempting to sort out safety problems.

Though Brandt’s graph appears to be important, it must be understood that that kind of speculation has been going on for a few months. The WSJ wrote on the plan of Goldman Sachs to do so on October 2 of the year in question.

Even if we ignore that date, Goldman Sachs seems to have ditched the plans to open its BTC trading desk. More significantly, there aren’t a lot of comparisons between the 2017 bull run and the ongoing marketplace when it comes to their composition.

BTC marketplace capitalization, volume from 2017, $ billion.

See how the BTC amount increased from an average of $2 billion a day in Nov. 2017 to $14.6 b to the end of the year, a sevenfold rise. The upcoming retail demand was so good that the Binance, Bitfinex and Bittrex exchanges temporarily refused new users.

Binance accounts were also sold directly by users to other ones at a time when no novel signups were approved. To put it differently, there’s no retail frenzy in BTC close to what occurred at the end of 2017. Actually, the bullish cycle of the moment seems to be fueled by entities that seem to be picking up Bitcoin on any dip.

BTC marketplace capitalization, volume, $ billion.

Meanwhile, the average trading value of $66 billion a day seen on Feb. 22, as Bitcoin’s marketplace cap reached $1.09 trillion, had been pretty flat for the last 6 weeks.

Accordingly, an accomplished tech analyst, like Brandt, should have said that volume is the most important measure of market participation — which he also stresses in his other analyses.

In order to solve this gap for good, the fundamentals of futures marketplaces need to be understood. Derivatives exchanges charge either perpetual futures longs (purchasers) or shorts (sellers) an expense each 8 hours to maintain a balanced risk exposure. This measure, called the funding rate, will switch to positive as long as more leverage is needed.

Bitmex Bitcoin perpetual futures weekly funding rate, 2017.

As shown in the above map, purchaser were ready to cash out to forty percent each week to exploit their long positions. This is utterly non-sustainable and a symbol of intense optimism. Any marketplace decline may have led to cascading liquidations, with the Bitcoin price speeding to the downside.

BitMEX Bitcoin perpetual futures weekly funding rate.

Those exorbitant rates no longer exist, although the latest 4 percent weekly funding rate has been the biggest since June 2019. However, scales of magnitude smaller than late-2017 are scandalous retail-fueled long leveraging run.

And last but not least, one consideration should be the start of Chicago Mercantile Exchange and Chicago Board Options Exchange futures contracts in December 2017. That extraordinary occurrence had a huge effect on the BTC economy. Looking back, this looks to have been the alert the bears waited for. As a consequence, Goldman Sachs’ balking was possibly an aftereffect, not the root.

But while Brandt became established in the crypto-sphere for expecting 80 percent correction following the 2017 BTC price limit, his track record has been less than wowing recently.

To conclude, there is no proof to support Brandt’s idea apart from one case that occurred just one time in the eleven years of BTC trades. Also, the 2017 Goldman Sachs crypto desk trading rumors had been circling for some time.