Goldman Sachs Stock Could Soar on Bitcoin-Like Patent
There are few certainties in this world, but one of them is that The Goldman Sachs Group, Inc. (NYSE:GS) will always be one step ahead of the pack. That is an unflinching truth that will keep GS stock atop the financial pyramid, especially now that the company is patenting its own version of Bitcoin.
Goldman Sachs filed a patent application for its own cryptocurrency settlement system, meaning it intends to challenge Bitcoin for digital dominance. I’ve been known to be a little pessimistic about Bitcoin (because it will never work) and cryptocurrencies in general; however, this is a little different.
If any one entity could steer global payments toward a cryptocurrency like Bitcoin, it would be Goldman Sachs. The company has enormous influence in both financial and political spheres, which would lend credibility to the currency.
Goldman’s version of Bitcoin is called “SETLcoin.” It is based on the same blockchain system that provides an instantaneous transfer of funds between electronic accounts. From my vantage, this could spell enormous returns for Goldman Sachs stock. (Source: “Goldman Sachs files patent for virtual settlement currency,” The Financial Times, December 3, 2015.)
Bitcoin vs. GS Stock
My past statements on Bitcoin and other cryptocurrencies are incredibly bearish. In fact, I was even added to the Bitcoin Obituary List, which is reserved for the most bearish of all bears. Bitcoin fanatics add authors to the list when they make a cohesive argument for why Bitcoin is doomed.
Considering my limitless pessimism on Bitcoin, how could I possibly think Goldman Sachs could succeed? The answer lies in the goals and methods of each cryptocurrency.
Bitcoin had a distributed power structure. Its followers loved that no one had control over the currency’s direction, yet that meant its growth had to be organic. Bitcoin needed a lot of merchants to accept it as a valid payment method before its value could stabilize, but merchants were reluctant to accept it until Bitcoin proved to be stable.
That is a catch-22 if I ever heard one. Bitcoin had an overly ambitious goal without a viable strategy for getting there. Goldman Sachs, on the other hand, has plenty of market power and, I think, a dedicated purpose for SETLcoin.
According to Goldman’s patent application, it is looking “to substantively instantly settle securities, based on cryptographic currency technology, without the risks associated with traditional settlement technologies.” (Source: Ibid.)
The phrase that caught my attention was “instantly settle securities.” That would imply that Goldman Sachs plans to incorporate the cryptocurrency as a liquidity mechanism, something you can sell stocks or derivatives for.
I’m not yet sure how it would work, but it sounds to me like Goldman Sachs wants to remove the fees associated with buying and selling financial assets. Since the pool of securities brokers is much smaller than the sum of “all people accepting money everywhere,” SETLcoin is more likely to survive than Bitcoin.
SETLcoin Is a Big Win for Goldman Sachs Stock
So what’s in it for Goldman Sachs? Well, there is a big debate raging within financial institutions that are working on cryptocurrency systems. Should they make the currency open-source like Bitcoin or keep them as private markets?
If SETLcoin is used for settling big transactions in capital markets, it would make sense to keep the currency private. That would mean that the creation of the currency, through digital mining, would largely fall on the shoulders of Goldman Sachs.
As the currency appreciates, GS stock’s net value would shoot through the roof and all it would have taken was time and software coding. Brilliant.