Goldman Sachs one of the largest banks in the US has made its first over-the-counter (OTC) cryptocurrency transaction with Galaxy Digital. The bank is using this development as a means of expanding its presence in the digital asset market.
The firm is the first big U.S. bank to trade cryptocurrency over the counter. Goldman announced on Monday that they have traded a bitcoin-linked product known as a non-deliverable option with crypto merchant bank Galaxy Digital.
Because of the nature of OTC deals, the move is considered a significant step forward in the development of crypto markets for institutional investors. According to the firms, by acting as a principal in the trades, Goldman is taking on more risk than the exchange-based CME Group bitcoin products it began trading last year.
According to Galaxy co-President Damien Vanderwilt, the fact that Goldman Sachs is a leading participant in global traditional asset markets indicates that the asset class has matured for institutional players such as hedge funds.
Vanderwilt also noted:
“This deal represents the first move that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients.” Compared to cleared futures or other exchange-based products, options trading are “far more systemically relevant to markets.” “At a high level, that’s due to the ramifications of the risk banks are taking; they’re expressing their faith in crypto’s maturity to date.”
Hedge funds and Bitcoin exposure
Hedge funds have been looking for derivative exposure to bitcoin, either to make price bets without directly owning it or to hedge current exposure to it, according to the firms. Crypto-native enterprises such as Galaxy, Genesis, and GSR Markets dominate the market for these securities.
In a statement, Max Minton, Goldman’s Asia Pacific head of digital assets, stated, “We are thrilled to have conducted our first cash-settled cryptocurrency options exchange with Galaxy.” “This is a significant advancement in our digital asset capabilities as well as the asset class’s overall progress.”
Goldman’s global head of crypto trading Andrei Kazantsev stated in December that the bank has observed strong demand for digital asset options.”We envision the development of options markets as the next great step,” he said.