Goldman Sachs becomes first major US bank to make over the counter Bitcoin trade

What 

Wall Street stalwart Goldman Sachs has become the first major bank in the US to make an over the counter (OTC) Bitcoin trade by buying a Bitcoin-linked investment instrument called a non-deliverable option (NDO) directly from Galaxy, a financial services firm specialising in cryptocurrency

Why 

Goldman Sachs explained the trade as an important part of developing its digital assets capabilities and as the evolution of Bitcoin as part of this asset class

What next 

Through this trade, the bank is making direct trading in Bitcoin-linked investments possible for investors 

The story 

Goldman Sachs continues its expansion into cryptocurrency with its latest OTC trade of an NDO, also known as a cash-settled option, with Galaxy. The Bitcoin NDO trade will pay out in cash when the option is settled. 

Essentially, it means that rather than buying actual Bitcoin, Goldman Sachs has bought a contract from Galaxy betting on the future price of Bitcoin. 

This is not the first time the bank has invested in these kinds of derivative instruments, but what makes this trade unique is that it was made directly between Goldman Sachs and Galaxy Digital, and not through an exchange, hence the reference to “over the counter”. It implies that the digital asset class, which includes cryptocurrencies, may be maturing.  

“This is an important development in our digital assets capabilities and for the broader evolution of the asset class,” said Max Minton, Asia Pacific head of digital assets for Goldman Sachs. 

Commenting on the transaction, Damien Vanderwilt, Head of Global Markets at Galaxy Digital, said, “We expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets.”