Peter Brandt, a highly regarded senior trader and CEO of his own trading firm Factor LLC, recently expressed his thoughts on whether Goldman Sachs might restart its money crypto business.

We old-timers have learned that when @GoldmanSachs enters a market niche, it’s time to protect your money. $BTC pic.twitter.com/tHfRkS4igb

– Peter Brandt (@PeterLBrandt) March 1, 2021

A similar story from Bloomberg on the 21st. In December 2017, Goldman Sachs said it would set up a trading desk for crypto currency, although the bank is still working on fixing security problems.

While Brandt’s chart seems telling, one must understand that this type of speculation has been going on for a few months. The Wall Street Journal reported on Goldman Sachs’ intention to do so on October 2, 2017.

Even aside from the exact date, Goldman Sachs seems to have abandoned its plans to open a Bitcoin (BTC) trading platform. More importantly, there are not many similarities between the 2017 bull run and the current market in terms of their structure.

Bitcoin Market Liquidation, End 2017 Volume, Billions of Dollars Source : TradingView

Note how the volume of BTC increased from $2 billion per day in November 2017 to $14.6 billion by the end of the year, a sevenfold increase. The demand from retail customers was so impressive that the exchanges Binance, Bitfinex and Bittrex temporarily did not allow new users.

Financial accounts were even sold directly by users to other users at a time when no new registrations were being accepted. In other words, there is currently no commercial frenzy in the bitcoin sector, as there will be by the end of 2017. In fact, the current bullpen cycle seems to be driven by institutions that seem to rake in BTC with every dip.

Bitcoin market capitalization, volume, billion USD. Source : TradingView

Meanwhile, the average daily trading volume on the 22nd was $66 billion. The month of February, when Bitcoin’s market capitalization peaked at $1.09 trillion, had been relatively stable for the previous six weeks.

That’s why a seasoned technical analyst like Brandt should have added the caveat that volume is the most important indicator of market participation – something he often emphasizes in his other analyses.

To bridge this gap permanently, you need to understand the fundamentals of the futures markets. Derivatives exchanges charge for long (for buyers) or short (for sellers) futures contracts every eight hours to ensure balanced exposure. This indicator, called the refinancing ratio, becomes positive when more debt capital is required for longer maturities.

Bitmex BTC weekly funding price of perpetual futures, end of 2017. Source : TradingView

As you can see in the chart above, buyers were willing to pay up to 40% per week to profit from their long positions. This is totally unacceptable and shows extreme optimism. Any decline in the market would result in a cascade liquidation that would accelerate the decline in the BTC price.

BitMEX BTC weekly perpetual futures funding rate. Source : TradingView

These exorbitant rates no longer exist, although the current weekly subsidy rate of 4% is the highest since June 2019. Still, the scale is smaller than the long hype that erupted in late 2017.

Finally, don’t forget that CME and CBOE futures contracts were introduced in December 2017. As Montelegraf astutely put it at the time: This unprecedented event could have a major impact on Bitcoin’s economy. In retrospect, this was the signal for the height of euphoria the Bears were waiting for. So the split of Goldman Sachs is probably an effect, not a cause.

But while Brandt has become a leader in cryptocurrency by anticipating a correction of more than 80% after the sharp rise in bitcoin prices in 2017, his recent track record is less impressive.

So in summary, there is no evidence for Brandt’s theory other than an event that occurred once in 11 years of bitcoin trading. Not to mention that there were rumors of cryptocurrency trading at Goldman Sachs in 2017.

The views and opinions expressed herein are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research when you make your decision.

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