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Goldman Sachs hits new milestone in crypto trading
Major US bank conducts first OTC crypto transaction together with Galaxy Digital
Increasing maturity of the asset class for institutional players
Blockchain and cryptocurrency financial services provider for institutions, Galaxy Digital, announced in a press release last week that the company’s trading unit has completed the first OTC crypto transaction with Goldman Sachs in the form of a Bitcoin non-deliverable option (NDO ) enabled and carried out.
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Goldman Sachs and Galaxy Digital continue collaboration
As Galaxy Digital writes in its press release, this is the first OTC crypto transaction by a major bank in the United States. Goldman Sachs is thus demonstrating the continuous maturation and acceptance of digital assets by banking institutions and is further expanding its range of cryptocurrencies.
“We are pleased to have completed our first cash-settled cryptocurrency options trade with Galaxy,” Max Minton, head of digital assets for Goldman Sachs in Asia Pacific, is quoted in the press release. “This is an important development in our capabilities for digital assets and for the broader development of the asset class.”
The collaboration isn’t Goldman Sachs’ and Galaxy Digital’s first. Last year, Galaxy Digital was the liquidity provider on Goldman Sachs’ first bitcoin futures transaction on the CME. And so Damien Vanderwilt, Co-President and Head of Global Markets at Galaxy Digital, said: “We are pleased to further strengthen our relationship with Goldman and expect that the transaction will open the door for other banks to use the OTC as a channel for the Consider trading digital assets”. Goldman’s “continued trust” is, according to Vanderwilt, “a testament to Galaxy’s expertise and ability to serve the evolving needs of institutions as crypto establishes itself as a fifth asset class.”
As CNBC reports, Goldman Sachs’ foray into OTC crypto trading is seen as a notable step in the development of crypto markets for institutional investors. Goldman Sachs is thus taking a greater risk – compared to the exchange-based Bitcoin products of the CME – since the bank acts as the client in the transactions.
Increasing maturity of the asset class for institutional players
According to CNBC, the companies explained that hedge funds were looking for derivative exposure to Bitcoin in order to bet on the Bitcoin price or to hedge an existing exposure to it. So far, however, according to CNBC, the market for these instruments has been mainly controlled by crypto companies such as Galaxy, Genesis and GSR Markets.
According to Galaxy Co-President Damien Vanderwilt, the fact that Goldman, a top player in the global markets for traditional assets, is now involved is a signal of the increasing maturity of the asset class for institutional players such as hedge funds. “This trade represents the first step banks have taken to offer direct, customizable exposure to the crypto market on behalf of their clients,” CNBC quoted Vanderwilt as saying in an interview. Options trading is “much more systematically relevant to the markets compared to cleared futures or other exchange-based products,” Vanderwilt said. “At a high level, that’s because of the impact of the risks banks are taking; they imply their confidence in crypto’s maturity to date.”
It remains to be seen whether other banks will follow Goldman Sachs’ example and also want to offer OTC crypto transactions.
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