The rumors were true: Goldman Sachs has reportedly conducted its first OTC crypto option trade with investment firm Galaxy Digital. This marks the first of any such trade among all major US banks, and a big milestone for the crypto derivatives market.
Bitcoin Options Trades
Earlier this month, unidentified sources claimed that Goldman was contemplating offering bilateral crypto options for institutional clients. Apparently, it was just one of multiple Wall Street Banks to start exploring the idea.
Today, CNBC reported that the bank will soon announce its first of such trades, entailing a non-deliverable option trade with Galaxy Digital.
Options are contracts that reserve holders the right to buy or sell an underlying security at a given price, for a specific amount of time. This means that they can trade the volatility of an underlying asset without necessarily being exposed to its risks.
Non-deliverable options are options settled in cash at maturity, rather than the underlying asset, such as Bitcoin. Therefore, this option from Goldman will not be involved in taking actual Bitcoin on or off the spot market.
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To clarify, Goldman already began trading Bitcoin futures contracts with Galaxy Digital last year. However, the new options will be riskier for the bank, which is acting as a principal in the transactions.
Damien Vanderwilt – co-president of Galaxy Digital – believes Goldman’s involvement with this market highlights crypto’s maturity as an asset class.
“This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients,” he said in an interview.
Vanderwilt added that options trades are much more “systematically relevant” for institutions than futures trades “because of the implications of the risk banks are taking on.”
Goldman and Galaxy’s Crypto Views
The investment bank has evidently come a long way with its openness to cryptocurrency. Despite opposition to the asset class years ago, a former Goldman CEO has now admitted that crypto is “happening”.
On the other hand, Galaxy Digital CEO Mike Novogratz is a well-established voice in the crypto community. He is on record claiming that Bitcoin will become “digital gold” for 3000 years and that Ethereum will go even further than that.
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