More On: Goldman Sachs
Goldman Sachs is expanding its presence in the embryonic market for derivatives based on digital assets.
According to CNBC, the firm is the first big U.S. bank to trade cryptocurrency over the counter. Goldman Sachs and cryptocurrency merchant bank Galaxy Digital announced Monday that they have traded a bitcoin-linked product known as a non-deliverable option.
Because of the nature of OTC deals, the move is considered as a significant step forward in the development of crypto markets for institutional investors. According to the firms, by acting as a principal in the trades, Goldman is taking on more risk than the exchange-based CME Group bitcoin products it began trading last year.
According to Galaxy co-President Damien Vanderwilt, the involvement of Goldman, a key participant in global markets for traditional assets, is a sign of the asset class's greater maturity for institutional players like as hedge funds.
"This deal constitutes the first move that banks have taken on behalf of their clients to give direct, adjustable exposures to the crypto market," Vanderwilt said in an interview.
Options trades are "far more systemically relevant to markets than cleared futures or other exchange-based products," according to Vanderwilt. "At a high level, this is due to the implications of the risk banks are taking; they are expressing their belief in crypto's maturity to date."
Hedge funds have sought derivative exposure to bitcoin, either to speculate on its price without directly owning it or to hedge current exposure to it, according to the firms. The market for these instruments is dominated mostly by crypto-native enterprises like as Galaxy, Genesis, and GSR Markets.
"We are delighted to have conducted our first cash-settled cryptocurrency options trade with Galaxy," Goldman's Asia Pacific head of digital assets, Max Minton, said in a statement. "This is a significant advancement in our digital asset capabilities as well as the overall evolution of the asset class."
Goldman's global head of crypto trading Andrei Kazantsev stated in December that the bank has witnessed considerable demand for options connected to digital assets.
"The next big step we see is the establishment of options markets," he said.
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