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Goldman Sachs offers new derivatives of Bitcoin to investors

In an internal note exclusively obtained by Consumer News and Business Channel (CNBC) last May 7, Wall Street investment bank Goldman Sachs announced a new cryptocurrency derivatives trading desk where non-deliverable forwards (NFTs) related to Bitcoin can be traded.

The note released to staff and was written by Goldman partner Rajesh Venkataramani revealed that the investment bank’s trading desk has traded Bitcoin NDFs and CME BTC future trades since early May.

Venkataramani added that Goldman Sachs “is not in a position to trade Bitcoin or any cryptocurrency [including Ethereum] on a physical basis” and therefore, all future trades and derivatives will be settled in cash.

Max Minton, Goldman Sach’s Asia-Pacific Head of Digital Assets, told business news site Bloomberg on May 7 that ‘institutional demand continues to grow and being able to work with partners like Cumberland will help us expand our capabilities.’

He added that the crypto derivatives trading desk is “paving the way” for the improvement of their new cash-settled cryptocurrency offers.

In response, Global Head of Business Development for Cumberland DRW, Justin Chow said, ‘Goldman Sachs serves as a good lead in showing how institutional investors are approaching the shift in the market’ in a report by Bloomberg last May 7.

He further commented that the interest in cryptocurrencies this year continues to increase and the “entrance of Goldman Sachs into this space is another sign of how it’s maturing”.

Bloomberg notes that Goldman Sachs offering derivatives is a way for them to lessen their risk of exposure to BTC. Through buying and selling BTC futures through CME Group Inc. and with Cumberland DRW as its trading partner, the company is protected from the volatile nature of the cryptocurrency market.

Although the products of Goldman Sachs do not deal with physical Bitcoin, they also plan to either offer clients exchange-traded funds based on BTC or access to the Grayscale Bitcoin Trust.

Reports of a crypto trading desk from Goldman Sachs have been circulating since 2017. However, no further reports were noted until March 2021, when news site Reuters reported the restarting of Goldman Sachs’ crypto trading team to help Goldman Sachs’ institutional clients deal in publicly traded futures tied to Bitcoin.

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