One of the leading U.S Bank Goldman Sachs is entering into digital assets-based derivatives with crypto merchant bank Galaxy Digital. The Bank became the first giant financial institution to trade crypto over the counter (OTC).
In Brief:
- The move will provide great exposure to crypto derivatives and options trading for institutional investors.
- The bank is taking on greater risk by acting as a principal in the transactions.
As per the source, Goldman Sachs has traded a Bitcoin-backed instrument, which is known as a non-deliverable option with the merchant bank.
The exceptional move from Goldman Sachs is expected to provide great exposure to digital assets by institutional investors as it is linked to OTC trades. The firm stated that the bank is taking on greater risk by acting as a principal in the transactions.
According to Galaxy co-President Damien Vanderwilt, a dive in the crypto derivative space by Goldman shows the potential emergence and great demand of the digital asset class among institutional investors.
“This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients,” Vanderwilt said in an interview.
The options trades are “much more systematically relevant to markets compared to cleared futures or other exchange-based products,” Vanderwilt said. “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.”
According to the firm, hedge funds have been anticipating derivatives exposure to bitcoin by wagering on its price without acquiring it or hedging existing exposure to it.
The current market for digital assets-backed option and derivative trading is currently dominated by crypto-centric firms including Galaxy, Genesis and GSR Markets.
“We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy,” Max Minton, Goldman’s Asia Pacific head of digital assets, said in a statement. “This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”
The latest move reveals another close tie-up between Goldman Sachs and Galaxy Digital. At the beginning of this month, U.S. Securities and Exchange Commission (SEC) Form D filings revealed that Galaxy Digital Will Give ETH Services to Goldman Sachs Clients.
