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Goldman Sachs Hedge Funds Dive Back into Crypto

Last Updated March 26, 2024 11:27 AM
Teuta Franjkovic
Last Updated March 26, 2024 11:27 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Goldman Sachs’ hedge fund clients are returning to the cryptocurrency market.
  • The company offers options and futures contracts for BTC and ETH but doesn’t directly trade the actual cryptos.
  • It is exploring new areas like tokenizing traditional assets with its GS DAP platform.

It’s not just audacious retail traders making a comeback to cryptocurrency markets.

Hedge-fund clients of Goldman Sachs are re-entering the crypto scene  as well.

Catering to Crypto Comeback With Derivatives, Sees Client Surge

Goldman Sachs, which established its cryptocurrency trading desk in 2021, now offers trading in cash-settled options for Bitcoin and Ether, as well as futures for Bitcoin and Ether that are listed on the Chicago Mercantile Exchange (CME). The firm does not engage in trading the actual cryptocurrency tokens themselves.

Options trading lets investors buy or sell an asset at a predetermined price on or before a specific date without the obligation to do so. Cash-settled options are when the seller pays the buyer the difference in cash between the market price and the strike price, instead of transferring the actual asset.

Futures contracts, on the other hand, are agreements to buy or sell an asset at a future date at a price agreed upon today. Both options and futures can be used for speculation or hedging purposes, providing investors with tools to manage risk or exposure to the price movements of Bitcoin and Ether without holding the actual cryptocurrencies.

Max Minton, Goldman’s Asia Pacific head of digital assets said :

“The recent ETF approval has triggered a resurgence of interest and activities from our clients. Many of our largest clients are active or exploring getting active in the space.”

Goldman Sachs Sees Crypto Surge: Offering Options, Eyes New Clients

According to  Minton, activity fell last year. Since the beginning of this year, however there’s been a noticeable resurgence in client interest regarding onboarding. Meanwhile, more people are taking a look at the volume and potential deals pipeline.

Goldman Sachs spike in crypto options
Credit: US Weekly

This renewed interest primarily stems from Goldman Sachs’ pre-existing clientele, which is largely composed of traditional hedge funds. Furthermore, the bank is broadening its horizon to cater to a more diverse clientele that includes asset managers, bank customers, and selected firms specializing in digital assets.

Beyond Trading, Targeting New Assets and Infrastructure

As per Minton, clients are leveraging cryptocurrency derivatives  to make speculative investments, enhance returns, and manage risk through hedging. He noted that products related to Bitcoin are currently receiving the bulk of attention from clients. However, the interest in Ether-related products could shift, particularly if ETFs (Exchange-Traded Funds) based on Ether receive regulatory approval in the United States.

Beyond mere trading, Goldman Sachs is also pioneering in the use of blockchain technology for the tokenization of traditional assets. The bank has established a digital asset platform known as GS DAP. It has also recently taken part in a trial run on a blockchain network designed to help connections between banks, asset managers, and exchanges.

Moreover, Goldman has invested in startups that align with its vision for the future of digital assets and the development of market structures, focusing primarily on companies that provide blockchain infrastructure. These ventures are part of the bank’s broader initiative to integrate digital assets and blockchain technology into its financial services.

Mintod concluded :

“We have a portfolio and will invest if or when it makes strategic sense.”

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