Goldman Sachs Trades First Over-the-Counter Crypto Transaction with Galaxy Digital

Goldman Sachs Group Inc, a major US multinational investment bank headquartered in New York City, has further expanded its digital-asset offerings to Wall Street investors. - 2022-03-22T141655.935.jpg

The investment bank announced Monday that it has traded the first non-deliverable Bitcoin option, a derivative tied to Bitcoin’s price that pays out in cash.

The transaction was facilitated by Galaxy Digital Holdings Ltd., a crypto financial-services company led by former Goldman partner Michael Novogratz. The move marked Goldman’s push further into the nascent market for derivatives tied to digital assets.

The product launch is important as crypto holders such as hedge funds, and Bitcoin miners are looking for derivative exposure to Bitcoin, either to make bets on the cryptocurrency’s price without directly owning it or to hedge existing exposure to it. They use options to hedge risks or boost yields, and over-the-counter transactions are normally larger trades negotiated privately.

In a statement, Damien Vanderwilt, the co-president and head of global markets at Galaxy, talked about the development and said: “This marks the first OTC crypto transaction by a major bank in the U.S. as Goldman Sachs continues expanding its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions. The move is set to open the door for other banks considering OTC as a conduit for trading digital assets.”

Max Minton, Goldman’s Asia Pacific head of digital assets, also commented about the announcement and stated: “This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”

Enabling Customer’s Access to Digital Assets Markets

Early this month, Goldman Sachs Group Inc started exploring offering over-the-counter bilateral crypto options, which signalled to expand its participation in helping firms trade digital-currency derivatives.

Following a growing demand from institutional clients, Goldman reopened its crypto trading desk in March last year after a three-year break. As a result, Goldman tapped Galaxy Digital as its liquidity provider or a market maker for block trades on CME Group. Goldman opened up trading of non-deliverable forwards, a derivative tied to Bitcoin’s price that settles in cash. It also provides exchange-listed options and futures trading in Bitcoin and Ether.

The major investment bank has seen demand for derivative-type hedging, and the development of an options market is set to be the next big thing.

The market for these options is still in its infancy and has been dominated by crypto-native companies like Galaxy Digital Holdings Ltd, Genesis Global Trading Inc., and GSR.

Through Galaxy Digital, Goldman now provides liquidity and takes risk on behalf of clients to facilitate larger crypto derivatives trades.

Image source: Shutterstock

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