Significant Growth in ‘Institutional Demand’ Pushes Goldman Sachs to Offer Bitcoin Derivatives Trading
Banking giants are finally coming around due to continuously increasing demand from clients. Starting with cash-settled cryptocurrency capabilities, Goldman can soon further go deeper with BTC-based exchange-traded notes or GBTC.
Goldman Sachs Group is now allowing its clients to trade Bitcoin derivatives.
The banking giant is going deeper into the trillion-dollar crypto-asset market by offering the Wall Street investors a way to place big bets, first introduced last month without an announcement.
“These guys are so behind the curve they should just rebrand as Goldman Lags,” commented trader and economist Alex Kruger.
On Friday, Goldman unveiled its new crypto trading team in an employee memo and reported that its crypto trading desk has already successfully executed two kinds of bitcoin-linked derivatives — “BTC NDFs and CME BTC future trades on a principal basis, all cash settling,” reported CNBC.
Looking to broaden its market presence by “selectively onboarding” crypto trading institutions, the firm has also launched a new software platform to provide the latest crypto prices and news to its clients.
The investment bank has opened up trading with non-deliverable forwards, a derivative tied to the price of bitcoin that pays out in cash. With Cumberland DRW as its trading partner, the bank will be hedging the volatility by buying and selling bitcoin futures in block trades on CME Group. Max Minton, Goldman’s Asia-Pacific head of digital assets said,
“Institutional demand continues to grow significantly in this space, and being able to work with partners like Cumberland will help us expand our capabilities.”
The new offering is “paving the way for us to evolve our nascent cash-settled cryptocurrency capabilities,” he added.
Banking giants like JPMorgan, Morgan Stanley, Goldman Sachs, and others have been keeping their distance from the Bitcoin and crypto industry for years, but now, as it grows into a $2.4 trillion market, everyone wants a piece of it.
“Goldman Sachs serves as a bellwether of how sophisticated, institutional investors approach shifts in the market,” said Justin Chow, global head of business development for Cumberland DRW.
“We’ve seen rapid adoption and interest in crypto from more traditional financial firms this year, and Goldman’s entrance into the space is yet another sign of how it’s maturing.”
The bank, however, is still not dealing directly with Bitcoin as the product offered by Goldman Sachs doesn't require dealing with physical bitcoin.
But the bank may offer its hedge fund clients exchange-traded notes based on bitcoin or access to the Grayscale Bitcoin Trust (GBTC), reported Bloomberg citing people familiar with the matter. “The crypto ecosystem is developing rapidly,” Chow said.
“There is progress being made in offering ETFs, new custody providers coming online, and optimism that regulatory efforts are coming into focus. It’s a great time to be in space.”