Bitcoin falls after Goldman reportedly drops crypto trading plans
- Goldman Sachs is dropping its plan to open a trading desk for cryptocurrencies, Business Insider says, citing people familiar with the matter.
- Bitcoin fell roughly 5 percent to below $7,000 following the report, and the rest of the top five cryptocurrencies by market cap were all down by more than 12 percent.
- "To the extent that they represent the institutional herd, this is a negative," Brian Kelly of BKCM says.
Bitcoin slipped below $7,000 Wednesday after a report that Goldman Sachs is abandoning plans to open a trading desk for cryptocurrencies.
The world's largest digital currency fell roughly 6 percent to a low of $6,866.06, according to data from CoinDesk.
Goldman still sees the regulatory environment as ambiguous, according to Business Insider, which cited people familiar with the matter. The Wall Street giant has been considering the launch of a new trading operation focused on bitcoin and other digital currencies for the past year. The bank's CEO Lloyd Blankfein tweeted in October that Goldman was "still thinking about bitcoin."
"No conclusion - not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold," Blankfein said at the time.
Executives now say more steps need to be taken, most of them outside the bank's control, before a regulated institution would be allowed to trade cryptocurrencies, according to Business Insider.
Goldman would not confirm the report to CNBC, and repeated its only public comment on the matter.
"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," Goldman Sachs said in a statement.
Brian Kelly, founder and CEO of crypto hedge fund BKCM, said while this doesn't have an impact on actual bitcoin trading volume short-term, the report pours cold water on long-term sentiment.
"They were not a part of the ecosystem yet, but to the extent that they represent the institutional herd, this is a negative," Kelly said.
Bitcoin has been selling in a narrow corridor around $7,000 for the past month. Late Tuesday night, it drove up to $7,400, its highest point since the first week of August, according to data from CoinDesk.
Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, said that price level represented a selling trigger for some investors who had been waiting for prices to recover.
"Until there's additional institutional investor interest to drive demand in pricing, many active managers in the space are going to continue to buy low and sell high," DiPasquale said.
Institutional interest has been a barometer for prices, especially this summer. Rumors of the first-ever bitcoin ETF being approved drove prices over $8,000 in July. Prices later slipped back below $7,000 after the Securities and Exchange Commission rejected the bitcoin exchange-traded funds from ProShares and other crypto ETF plans by GraniteShares, Direxion and the Winklevoss brothers.
Bitcoin prices have struggled to recover to their high near $20,000 hit in December. The entire market capitalization for all cryptocurrencies is down roughly 63 percent this year, according to data from CoinMarketCap.com.
Cryptocurrencies other than bitcoin known as "alt coins" fared even worse on Wednesday. Ethereum, the second largest cryptocurrency was down 13 percent, XRP fell 11 percent, while bitcoin cash and EOS were down 13 and 16 percent respectively.
Reuters contributed to this report.