Goldman Sachs Begins Trading Bitcoin Futures with Galaxy Digital as its “Liquidity Provider”

According to Galaxy co-president, this is about “safety in numbers,” and once one bank joins, the others will have FOMO and will get on-boarded.

Goldman Sachs has begun trading bitcoin futures with Galaxy Digital, a crypto investment firm founded by Mike Novogratz.

Galaxy will basically serve as the investment bank’s “liquidity provider.”

“Our goal is to equip our clients with best-execution pricing and secure access to the assets they want to trade,” which “now includes crypto,” said Max Minton, head of digital assets for the banking giant's Asia-Pacific region.

With this move, Goldman has taken the step forward to help hedge funds and other big institutional clients gain exposure to cryptocurrencies, reported CNBC.

The trades represent the first time that Goldman has used a crypto assets firm as a counterparty since it first set up its crypto desk last month, according to Damien Vanderwilt, Galaxy’s head of global markets division.

By being one of the first major US banks to start trading cryptocurrency, this will propel others to do the same, said Vanderwilt, a former Goldman partner.

“There’s a whole dynamic with the major banks that I’ve seen time and time again: safety in numbers.”

“Once one bank is out there doing this, the other banks will have (FOMO), and they’ll get on-boarded because their clients have been asking for it.”

Banks will be able to offer clients ways to wager on bitcoin using derivatives, much like traditional finance, he said.

According to Vanderwilt, the involvement of hedge funds, pensions, family offices, and sovereign wealth funds in bitcoin trading will improve the market depth and breadth and ultimately lower the volatility.

This is because, unlike retail which has access to “ridiculous amounts of leverage,” as much as 125x, the institutional community has proper rules and regulations about leverage, asset-liability mismatch, and risk.

As such, the more the activity from the institutional community, the less volatility in the crypto market, he said.

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