On Wednesday, May 19, 2010, a Goldman Sachs Group Inc. logo hangs on the floor of the New York Stock Exchange in New York, USA.

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Goldman Sachs is pushing further into the nascent market for derivatives linked to digital assets.

The company is about to announce that it will be the first major US bank to trade an over-the-counter crypto transaction, CNBC has learned. Goldman, according to the two companies, traded a bitcoin-pegged instrument called a undeliverable option with crypto merchant bank Galaxy Digital.

The move is seen as a notable step in the development of crypto markets for institutional investors, in part due to the nature of OTC transactions. Compared to the exchange-based CME Group bitcoin products that Goldman began trading last year, the bank is taking on more risk by acting as principal in the transactions, according to the companies.

The involvement of Goldman, a top player in global traditional asset markets, signals the increased maturity of the asset class for institutional players such as hedge funds, said Damien Vanderwilt, co-chair of Galaxy.

“This transaction is the first step 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 risks banks are taking; they imply their confidence in crypto’s maturity to date.”

Hedge funds are looking for derivatives exposure to bitcoin, either to bet on its price without owning it directly, or to hedge existing exposure to it, the companies said. The market for these instruments is largely controlled by crypto-native companies, including Galaxy, Genesis and GSR Markets.

“We are delighted to have conducted 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 capabilities for digital assets and for the broader evolution of the asset class.”

The bank has seen high demand for options tied to digital assets, Goldman’s global head of crypto trading Andrei Kazantsev said in December.

“The next big step we envision is the development of options markets,” he said.

This post Goldman Announces OTC Crypto Trading with Galaxy Digital was original published at “https://www.cnbc.com/2022/03/21/bitcoin-options-goldman-sachs-announces-otc-crypto-trade-with-galaxy-digital.html”


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