Bitcoin prices dropped for a second consecutive trading session. They are headed for support levels in the wake of news that Goldman Sachs is dropping its plan to create a bitcoin trading operation. While the news alone is not specifically negative for the price, the lack of a substantial liquidity provided shows that the market maker interest in the cryptocurrency space could be losing traction.
Bitcoin prices dropped nearly $1,000 following the news and had been rebounding after testing support levels near the August lows at $5,900. Prices have rebounded back to 1-month highs near 7,400, before the announcement was released.
Goldman Announces that It is Scraping Bitcoin Trading Services
Business Insider reported that Goldman decided to change direction and demote a bitcoin trading desk from the list of top priorities. While the financial giant might consider revisiting creating a bitcoin trading desk in the future, its immediate plans have changed and they have set their sights on other ventures.
The disappointing news comes after nearly a year of speculation as to whether the bank would consider operating a cryptocurrency unit that focuses on trading. Goldman is known as a trading house and is a leader in commodities and currency trading. The company has flip flopped several times and has sent different messages with regard to their intensions within the cryptocurrency market. During the first quarter of 2018, the company announced that it would soon be offering trading services related to Bitcoin, which was in stark contrast to earlier commentary that was less favorable.
According to Business Insider, the driving force behind the decision to scrap plans to move forward with a bitcoin trading desk were regulatory issues. It appears that the volatility associated with trading cryptocurrencies was a concern for Goldman. In a statement, Goldman said, “In response to client interest in various digital products, we are exploring how best to serve them in the space. At this point, we have not reached a conclusion on the scope of our digital asset offering”.
Custodial Services Takes Center Stage
It also appears that Goldman is not dismissing its plans to participate in the cryptocurrency market. Although the company decided that they would place bitcoin trading on the back burner, it does appear that they are moving forward with a cryptocurrency custodial department. Goldman was the first investment bank to offer bitcoin futures trading, which could naturally lead into custodial services.
Bitcoin prices continue to feel the headwinds generated by the loss of a top-flight name that was expected to enter the market. Goldman’s participation would have likely meant that the company would have been taking positions, which could have generated interest for others. The lack of their interest has taken the wind out of the sails of many who were hoping for a breakout. Momentum on bitcoin prices has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. Prices could test support levels near the August lows at 5,900.