Goldman Sachs Enters Trillion-Dollar Bitcoin Market with New Bitcoin Derivatives for Wall Street Investors

Original title: Goldman Sachs offers new Bitcoin derivatives to Wall Street investors

Author: Clare Wang

According to Bloomberg, US banking giant Goldman Sachs has begun offering Bitcoin-backed non-deliverable forward contracts to Wall Street investors, which are contracts where both parties agree to settle the difference between the spot price and the contract price on a certain date. Essentially, the contract allows Goldman Sachs clients to speculate on the price of Bitcoin.

The contract, which is paid in cash, hedges against cryptocurrency volatility by buying bitcoin futures in block trades at CME Group. Crypto asset trading firm Cumberland DRW serves as Goldman’s trading partner.

Max Minton, head of digital assets for Asia Pacific at Goldman Sachs, said in an interview with Bloomberg: “Institutional demand in this space continues to grow significantly, and being able to work with partners like Cumberland will help us expand our business. The new product paves the way for us to develop our emerging cash-settled cryptocurrency capabilities.”

The partnership with Cumberland highlights the bank’s willingness to work with outside firms to help it achieve that goal, the people said.

Wall Street banks have shunned Bitcoin since its inception in 2009, with JPMorgan Chase CEO Jamie Dimon once threatening to fire any trader who bought or sold the digital currency. Although Dimon has since softened his stance on crypto products, the banking world has long viewed Bitcoin as a plaything for criminals, drug dealers and money launderers.

However, client interest and bitcoin’s sky-high market value have swayed many bankers, with Morgan Stanley offering a bitcoin trust product to its clients and JPMorgan Chase & Co. working on a similar product.

BitPush previously reported that Goldman Sachs announced the relaunch of its cryptocurrency trading department in March this year and announced plans to get involved in cryptocurrency custody, providing private wealth clients with more means to bet on cryptocurrency prices. Therefore, it is not surprising that Goldman Sachs is moving in this direction.

Justin Chow, global head of business development at Cumberland DRW, said: "Goldman Sachs plays a bellwether role, reflecting how sophisticated institutional investors respond to changes in the market. This year, we have seen more acceptance and interest in cryptocurrencies from traditional financial companies, and Goldman Sachs' entry is another sign of the maturity of the field."

Still, banks remain wary of the regulatory challenges of holding bitcoin directly. Because the derivatives will be settled in cash, the product offered by Goldman Sachs does not require dealing with physical bitcoin. Similarly, Morgan Stanley and JPMorgan Chase & Co. trust companies give clients access to tools that track bitcoin prices while using third parties to buy and hold the underlying digital assets.

People familiar with the matter revealed that Goldman Sachs may next offer Bitcoin-based exchange-traded notes to hedge fund clients, or use the Grayscale Bitcoin Trust.

“The crypto ecosystem is evolving rapidly,” Chow said. “We are seeing progress in offering ETFs, new custodian providers coming online, and optimism about regulatory efforts coming into focus. It’s a great time to be in this space.”

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