- Goldman Sachs is expanding its presence in the nascent market for derivatives based on digital assets.
- Goldman Sachs and cryptocurrency merchant bank Galaxy Digital announced Monday that they had traded a bitcoin-linked instrument known as a non-deliverable option.
Goldman Sachs is expanding its presence in the nascent market for derivatives based on digital assets. Goldman Sachs and cryptocurrency merchant bank Galaxy Digital announced Monday that they had traded a bitcoin-linked instrument known as a non-deliverable option (NDO).
This is the first OTC cryptocurrency transaction by a major bank in the United States. It is the first OTC crypto transaction as Goldman Sachs expands its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions.
It also represents a continuation of the Bank’s collaboration with Galaxy Digital to expand its crypto capabilities, which included last year’s facilitation of the Bank’s first CME Group Inc. Bitcoin futures transaction.
According to Galaxy co-President Damien Vanderwilt, the involvement of Goldman, a top player in global markets for traditional assets, is a sign of the asset class’s increased maturity for institutional players such as hedge funds.
Vanderwilt said in an interview that “This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients”. He further said that the options trades are “much more systematically relevant to markets compared to cleared futures or other exchange-based products. At a high level, that’s because of the implications of the risk banks are taking on; they’re implying their trust 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 existing exposure to it, according to the firms. The market for these instruments is dominated primarily by crypto-native firms such as Galaxy, Genesis, and GSR Markets.
Max Minton, Goldman’s Asia Pacific head of digital assets, said in a statement that “We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy. This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”
Goldman’s global head of crypto trading Andrei Kazantsev said in December that “The bank has seen high demand for options tied to digital assets. The next big step that we are envisioning is the development of options markets”.