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Friday, September 24, 2021

Goldman Sachs to Begin Offering Bitcoin Derivatives to Investors 

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The red-hot crypto market has shown little to no signs of slowing down, and banks are starting to take notice. As Bitcoin and other major cryptos such as Ethereum rallied to record highs, institutional demand has also been on the rise. 

Goldman Sachs was one of the “earlier” adopters of the crypto space, exploring potential opportunities by restarting its cryptocurrency trading desk earlier this year. Citigroup announced earlier today that the firm was finally exploring the possibility of cryptocurrency products amid surging client interest — nearly 3 months behind Goldman.

Goldman Sachs went further by introducing Bitcoin-based products to clients in its private wealth management arm back in March. The bank also dabbled in selling notes linked to the performance of an exchange-traded fund (ETF) with crypto exposure. 

Goldman Begins Offering Bitcoin Products to Clients After Months of Cautious Experimentation

Now, in what appears to be a sign of confidence, Goldman Sachs is beginning to offer Bitcoin-based derivative products to its clients. 

According to Bloomberg, the derivatives the investment bank began offering are non-deliverable forwards. NDFs are cash-settled, short-term contracts that work similarly to futures, where the underlying assets are never exchanged. 

This will allow Goldman’s clients to speculate on both the long and short side of Bitcoin’s price action. The firm will hedge against Bitcoin’s historically high volatility by buying CME futures in block trades. Per Bloomberg, the investment bank will use crypto asset company Cumberland DRW as its trading partner.

Bitcoin (BTC/USD) Historical Volatility Index on Tradingview.com

Like Citi, JPMorgan has also begun entertaining the possibility of offering an actively managed Bitcoin fund to its clients. Blackrock, the world’s largest asset management firm, also added Bitcoin as an investment offering in two of its funds. 

With other major institutional players soon to follow suit, mass crypto adoption seems more likely than ever. 

Featured image from UnSplash

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