Bitcoin Hits Milestone, Goldman Sachs Announces First BTC Cash Settled Transaction
March 21, 2022 – 6:00 pm
Per a report from CNBC, banking giant Goldman Sachs has become the first U.S. bank to complete a cash-settled Bitcoin over-the-counter (OTC) transaction. The financial institution will officially announce this achievement in the short term, said the source cited by the mainstream media.
An over-the-counter transaction, Investopedia says, is a transaction that occurs without the intervention of an exchange platform. Two parties purchase security, a cryptocurrency, or an asset directly from each other on behalf of their clients.
In this case, the OTC was completed with Galaxy Digital as a Bitcoin-linked instrument known as a non-deliverable option. This financial derivative is cash-settled upon its maturity, and delivered to the investor, Goldman Sachs, for a difference and not for the underlying asset.
In other words, the financial institution made this OTC most likely for a profit after gaining exposure to the price of Bitcoin via Galaxy Digital’s product. CNBC claims this announcement signals a new step of maturity for BTC as an asset for institutional investors.
The financial institution, the report claims, has acquired more risk by trading OTC products and diversifying from their Chicago Mercantile Exchange (CME) trades. The report quotes Damien Vanderwilt, Galaxy Digital co-president. He said:
This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients.
The fact Goldman Sachs is publicly trading Bitcoin OTC products, CNBC stated, sends a powerful message of maturity across the market. Vanderwilt added:
(The options trades) are much more systematically-relevant to markets compared to cleared futures or other exchange-based products. At a high-level, that’s because of the implications of the risk banks are taking on; they’re implying their trust in crypto’s maturity to date.
Goldman Sachs Takes Its Bitcoin And Crypto Strategy To The Next Level
A year ago, Goldman Sachs began offering its wealthy clients exposure to Bitcoin products. The financial institution claimed the decision was made after receiving feedback from their clients. The demand for BTC’s price exposure was high, and the bank positioned itself to meet it.
This new OTC transaction is an important continuation of this strategy and hints at the success Goldman Sachs has had trading with cryptocurrencies.
According to CNBC, Hedge Funds and other institutional investors have been hungry for other crypto-based products to gain further exposure to BTC and other digital assets. In addition, big players are looking for derivatives to potentially hedge against unfavorable price movement and volatility.
Max Minton, Goldman Sachs’ Asia Pacific Head of Digital Assets, hinted at this transaction back in December 2021. At the time, he said the banking institution was looking to further strengthen its presence in the crypto options market. Minton told CNBC:
We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy. This is an important development in our digital assets capabilities and for the broader evolution of the asset class.
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At the time of writing, BTC’s price trades at $40,700 with a 1.4% loss in the last 24-hours.