This Was a Bad Week For Cryptocurrencies

The crypto market just can’t catch a break this year.

Having already endured a pretty terrible 2018, cryptocurrency investors were dealt another blow this week as Goldman Sachs has canceled its plans to open a cryptocurrency desk “in the foreseeable future,” according to a report by Business Insider. The main issue that seems to be putting the brakes on Goldman’s plans for a crypto trading desk is the continued uncertainty surrounding the regulation of digital coins.

Per Business Insider:

After months of expectation that Goldman would begin trading bitcoin earlier this summer, the investment bank publicly preached patience as it studied the burgeoning industry. In recent weeks, however, executives have concluded that many steps still need to be taken, most of them outside its control, before a regulated bank would be allowed to trade cryptocurrencies, one of the people said.

Sources tell Business Insider that Goldman may revive its plans for a crypto trading desk at some point in the future, but the bank is now turning its attention to other priorities, which could include launching a custody product for cryptocurrencies. This would mean Goldman “holds cryptocurrency and, potentially, keeps track of price changes on behalf of large fund clients,” according to Business Insider.

The report on Goldman’s change of plans was part of a one-two punch dealt to crypto investors this week: Erik Voorhees, chief executive officer of cryptocurrency exchange ShapeShift AG – and 0ne of the cryptocurrency market’s biggest supporters – said in a  blog post on Tuesday that it will be creating a membership program that “requires basic personal information to be collected.” The membership is currently optional, but “will become mandatory within one to two months,” Voorhees told Bloomberg.

Bloomberg called ShapeShift’s decision to require personal information from investors “a dark day for crypto” that seems to be abandoning the “original vision for Bitcoin” that balked at the rules of a centralized exchange. The decision has already been met with backlash.

Meanwhile, even though Goldman hasn’t completely ruled out trading cryptocurrencies down the road, investors reacted swiftly to the news it was ditching its plans for now. Cryptocurrencies plunged to a nine-month low on Wednesday, with Bitcoin dropping as much as 9.8 percent.

The concern for investors is that Goldman’s backtracking could be further proof “that broader adoption of digital assets will take longer than some anticipated,” as Bloomberg notes. Goldman Sachs could have obviously gone a long way toward legitimizing cryptocurrencies across a broader market of investors.

“Their name carries weight across the globe,” Ryan Rabaglia, head trader at digital asset brokerage OSL in Hong Kong, told Bloomberg. “When people see their name, their eyes may light up, and they say: OK, we’ve finally made it — the bigger players are going to start to enter.”

It’s also hard not feel as though one of Wall Street’s bigger champions of Bitcoin – or at least sympathizers – could be losing some of its confidence in the world’s largest cryptocurrency. Jeff Currie, global head of commodities research for Goldman, came to Bitcoin’s defense last year against other Wall Street luminaries who were declaring Bitcoin to be a “fraud” or a “bubble,” calling it “not much different than gold.”

It’s worth noting that Currie’s defense of Bitcoin came in November, when Bitcoin was soaring toward a record high. It might have been a bad sign then when Goldman’s mid-year economic report in July predicted that Bitcoin’s prices were only going to get worse – which has mostly been borne out.

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