💰Goldman goes all in
Goldman Sachs makes history with its first-ever OTC Bitcoin trade.
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The Big Story
From US President Joe Biden signing a first-of-its-kind crypto executive order to Ukraine legalizing digital assets amid a flurry of crypto donations, crypto has become more mainstream by the day.
While Wall Street is busy contemplating its future with digital assets, Goldman Sachs has already achieved its big milestone in the crypto space.
It has now become the first-ever major US bank to make an over-the-counter (OTC) crypto options trade.
The multinational investment bank, which has over $2 trillion assets under management, traded a non-deliverable Bitcoin option — a derivative tied to Bitcoin’s price that pays out in cash — with Galaxy Digital, a crypto merchant bank founded by former Goldman partner Mike Novogratz in 2018. Additional details about the transaction, such as its size, remain unclear.
"This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients," Galaxy co-president Damien Vanderwilt said, adding that the trade implies "their trust in crypto’s maturity to date.”
TL,DR: Crypto options offer a lucrative opportunity to investors as they’re relatively low-cost and low-risk solutions for trading digital assets than perpetual swaps or crypto futures. While the current options market is dominated by large institutions, retail traders are beginning to join the party.
The move marks a significant first step in the development of the crypto market for institutional investors, considering the nature of OTC trades, and further encourages other players to consider OTC as a conduit for trading digital assets.
No surprises
The Manhattan-based bank previously signalled its exploration aimed at helping institutions like hedge funds trade OTC bilateral crypto options — a space hugely dominated by crypto native firms, including Galaxy Digital Holdings, Global Trading Inc., and DRW Holdings LLC.
The decision was mainly prompted by the massive demand Goldman had received from its hedge fund clients for years, who were seeking derivative exposure to Bitcoin for either making wagers on its price without ownership or hedging their existing exposure to digital currencies.
As of writing, Bitcoin was up 3.09% at $42,323.65.
What’s more, this isn’t the first time that Goldman Sachs and Galaxy Digital have worked together. In May 2021, when Goldman began trading non-deliverable forwards, a derivative product tied to Bitcoin's price settled with cash, Galaxy announced that it would provide liquidity for the same. Soon, Goldman launched exchange-listed options and futures trading in Bitcoin and Ether.
The future
Ever since Bitcoin's inception in 2009, Wall Street has had quite a love-hate relationship with the cryptocurrency, from outright shunning it to broadly accepting and merging it into their operations. However, some large banks still aren't active in the crypto spot market due to the lack of regulatory clarity and “know your customer” rules.
That said, the mainstreaming momentum that we've seen in Bitcoin and other similar digital currencies so far is bound to continue on Wall Street as banks increasingly create crypto-dedicated teams and alternative asset managers get more involved in the space.
(PS: It’s already happening! LFGGG🚀)
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