Peter Brandt, a popular veteran trader and CEO of his own trading company Factor LLC, recently rekindled his thoughts on Goldman Sachs possibly starting his cryptocurrency.
Our old-fashioned have always learned it @GoldmanSachs entering a market, it’s time to protect your money. $ BTC pic.twitter.com/tHfRkS4igb
– Peter Brandt (@PeterLBrandt) March 1, 2021
On December 21, 2017, a similar piece from Bloomberg stated that Goldman Sachs would set up a cryptocurrency trading bank, although the bank was ‘still trying to work out security issues’.
Although Brandt’s graph seems important, one must understand that such speculations have been going on for several months. The Wall Street Journal discussed Goldman Sachs’ intention to do so as early as October 2, 2017.
Even if we do not disregard the exact date, Goldman Sachs has apparently abandoned plans to launch its Bitcoin (BTC) commercial bank. More importantly, there are not many similarities between the 2017 Bull Bull and the current market in terms of their structure.
Take note of how the BTC volume increased from an average daily volume of $ 2 billion in November 2017 to $ 14.6 billion at year-end, an increase of seven times. The incoming retail demand was so impressive that it temporarily rejected new users of Binance, Bitfinex and Bittrex exchanges.
Binance accounts were even sold directly to other users when no new sign-ups were accepted. In other words, there is currently no retail frenzy in Bitcoin, similar to what happened at the end of 2017. In fact, it appears that the current bull cycle is driven by institutions that seemingly collect BTC at every dip.
Meanwhile, the average trading volume of $ 66 billion daily on February 22, 2021, while Bitcoin’s market capitalization peaked at $ 1.09 trillion, was relatively even over the past six weeks.
Therefore, an experienced technical analyst such as Brandt should have added the warning that volume is the most important market participation indicator (which he regularly emphasizes in his other analysis).
To make up for this difference, you need to understand the basics of futures markets. Derivatives either charge perpetual futures longs (buyers) or shorts (sellers) a fee every eight hours to maintain a balanced risk exposure. This indicator, also known as the funding rate, will turn positive if it is longer which requires more leverage.
As the chart above shows, buyers were willing to pay up to 40% per week to take advantage of their long positions. It is completely unsustainable and a sign of extreme optimism. Any downturn in the market would have caused severe liquidations, with the BTC price accelerating to the detriment.
Such exorbitant rates no longer exist, although the current weekly funding rate of 4% was the highest since June 2019. Nevertheless, scales are below the outrageous retail-driven vigilance at the end of 2017.
Finally, it should be taken into account that December 2017 indicated the launch of CME and CBOE futures contracts. As Cointelegraph strictly stated at the time: ‘This unprecedented event could have a significant impact on the Bitcoin economy. Looking back, it looks like it was the peak euphoria signal the bears were waiting for. Thus, Goldman Sachs’ dismantling was probably the result, not the cause.
But while Brandt became known in the cryptocurrency space for anticipating the 80% correction after the 2017 Bitcoin price, his performance history has been less impressive lately.
To sum up, there is no evidence to support Peter Brandt’s theory, other than a single event that occurred once in the 11 years of Bitcoin trading. Not to mention the rumors of the Goldman Sachs cryptocurrency in 2017 for a while.
The views and opinions expressed here are only those of the outhor and does not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. You must do your own research when making a decision.