Institutional companies are excited about the profits generated from investing in Bitcoin, as a result of which they launch new financial instruments based on the PTS.
Institutions make enormous profits on BTC
Payments company Square Inc easily beat Wall Street expectations for quarterly earnings on Thursday, as surging demand for Bitcoin triggered a jump in cryptocurrency transactions on its peer-to-peer payment service Cash App.
Excluding one-time expenses, the payments firm, led by Twitter Inc’s top boss Jack Dorsey, earned 41 cents per share, generating revenue of $3.51 billion in Bitcoin, eleven times more than a year earlier, in the quarter when the market capitalization of the most popular cryptocurrency reached $1 trillion for the first time.
Dorsey told analysts during a conference call after the earnings report that the company sees Bitcoin as “the potential of the Internet to create its own currency.”
“This will be a long-term goal that will allow Bitcoin to become a national currency, which will eliminate a lot of friction for our business. We are fully confident that this creates more solutions for economic empowerment around the world”, he said.
Bitcoin has surged in value this year as support from leading companies, including Tesla Inc, has bolstered its march into the mainstream. Inspired by the success, companies and banks began to look for new opportunities to make a profit on BTC. Goldman Sachs, which has already launched a new product, was the quickest of all.
Goldman Sachs Launches New Bitcoin Derivatives
The well-known investment bank Goldman Sachs has started offering a new investment product based on Bitcoin. Bloomberg reports that this derivative will allow Wall Street investors to place big bets on the price of BTC.
The new derivatives from Goldman Sachs are non-deliverable futures contracts, paid in cash, and linked to the price of BTC. To hedge against volatility, the bank will buy and sell Bitcoin futures contracts on the Chicago Mercantile Exchange (CME), using Cumberland DRW as a trading partner.
Goldman Sachs ‘ head of digital assets in the Asia-Pacific region, Max Minton, said:
“Institutional demand in this area continues to grow significantly, and the opportunity to work with partners such as Cumberland will help us expand our capabilities. The new offer paves the way for us to develop our nascent cash-settled cryptocurrency capabilities”.
Goldman Sachs announced back in March that it plans to offer its clients additional funds to invest, or speculate on cryptocurrency prices.
Many financial institutions are still hesitant to take responsibility for storing full-fledged BTC in their own wallets, preferring to use regulated derivative products that are much easier for them to use.
These tools can bring a lot of new capital to the cryptocurrency markets, but not necessarily for investment purposes.
For example, in mid-December 2017, when Bitcoin futures contracts were launched for the first time in history on a major exchange such as the Chicago Exchange, the speculative bubble that then arose on the price of BTC burst, and the value of Bitcoin fell by 70% in just a month and a half.
Perhaps Goldman Sachs ‘ announcement spooked some speculators into believing that these new tools could be used primarily to bet against BTC.