The US investment bank is planning to roll out futures and options on ethereum (ETH/USD) as it expands its cryptocurrency offering beyond bitcoin.
Goldman Sachs Group will give its crypto clients an alternative to the already existing bitcoin (BTC/USD) offering including bitcoin trades offered via exchange-traded notes (ETNs) as institutional investors continue to look for exposure to the cryptocurrency space, according to a report, Crypto: A New Asset Class, released by the US investment bank.
More and more entities are becoming comfortable with having some exposure to the crypto space - Matthew McDermott
‘The product offering is broader as people are looking beyond bitcoin at the potential of the underlying blockchain infrastructure to transform the way markets behave,’ said Matthew McDermott (pictured), head of digital assets at the bank. ‘This has sparked interest in other kinds of cryptocurrencies - ether, dot, etc - whose value proposition revolves more around what else can be done on blockchains.’
Goldman is already transacting non-deliverable forwards (NDFs), which are cash settled, and CME futures on bitcoin and ether, ‘the latter on an agency basis for now’. To facilitate client transactions, the bank expects to trade the bitcoin CME future and certain pre-agreed upon bitcoin-linked securities on a principal basis in the near future.
‘From a prime brokerage perspective, we plan to offer clients the ability to go synthetically long/short bitcoin-linked securities and exchange-traded notes [ETNs] in Europe,’ said McDermott. ‘We’re also looking into offering lending structures in and around the crypto space to corporate clients as well as structured notes. And from a wealth management perspective, we are gearing up to offer access to cryptocurrencies, specifically bitcoin, via fund or structured note-like products.’
According to McDermott, Goldman Sachs is seeking to partner with multiple companies that share the bank’s strategic direction and promote adoption for which there are three key constraints
‘The first is mandate limitations,’ he said. ‘For corporates, increased involvement often depends on whether their board feels such involvement makes sense given the nature of the company and its objectives. And some investment funds and asset managers don’t have the authority to invest a portion of their portfolios in crypto.’
The second constraint is the ease of access to the market, the liquidity to meet investor needs, as well as the custody and security aspects of managing these assets; and the third constraint is whether having crypto exposure is the right thing to do and makes sense for investor portfolios, balance sheets etc.
‘As evidenced by the increased inflows, more and more entities are becoming comfortable with having some exposure to the crypto space,’ said McDermott. ‘Institutional adoption will continue. Despite the material price correction, we continue to see a significant amount of interest in this space.’
A recent survey conducted by Goldman Sachs with 850 institutions found that almost one out of 10 are trading cryptocurrencies and that 20% of the organisations are interested in crypto.
The US bank has been trading derivatives linked to the bitcoin’s price since the beginning of 2021 after it relaunched a trading desk earlier this year to let its clients publicly trade bitcoin futures.
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