Goldman’s OTC crypto trade may cement bank’s leading role in digital assets

Dive Brief:

• Goldman Sachs partnered with cryptocurrency firm Galaxy Digital to execute the first over-the-counter crypto transaction by a Wall Street bank, according to a press release Monday.
• Goldman traded a Bitcoin non-deliverable option, a derivative linked to the price of Bitcoin that is settled in cash at maturity, through Galaxy Digital. The size of the trade was not disclosed in the press release. 
• The historic trade demonstrates how Goldman’s perception of crypto has evolved since 2020, when the firm told investors “we do not recommend Bitcoin on a strategic or tactical basis for clients’ investment portfolios.”

Dive Insight:

The over-the-counter crypto trade represents a step in the direction of institutional adoption for digital assets. 

Major banks are leery of the risk associated with becoming a principal in OTC crypto trades, preferring to transact exchange-based products.

“We are pleased to have executed our first cash-settled crypto currency options trade with Galaxy,” Max Minton, Asia Pacific head of digital assets for Goldman Sachs, said in the press release. “This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”

After a three-year hiatus, the bank resumed trading crypto in March 2021. Goldman began offering investors access to Bitcoin non-deliverable forwards two months later, CoinDesk reported.

Then in June, Goldman announced that Galaxy Digital would serve as liquidity provider for the firm’s Bitcoin futures block trade.

Galaxy Digital, based in New York City, was founded in 2006 by Michael Novogratz, who worked at Goldman for 11 years, according to his company profile. 

“We are pleased to continue to strengthen our relationship with Goldman and expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets,” Damien Vanderwilt, Galaxy Digital’s co-president and head of global markets, said in the press release. “Goldman’s continuing trust in us is a testament to Galaxy’s expertise and ability to meet the evolving demands by institutions as crypto solidifies itself as the fifth asset class.”

Goldman said this month it would offer clients exposure to Ethereum through a fund issued by Galaxy Digital, according to CoinDesk.