The Wall Street behemoth Goldman Sachs has completed over-the-counter (OTC) cryptocurrency-related trade with cryptocurrency merchant bank Galaxy Digital.
According to the joint announcement on Monday, the OTC transaction was in the form of a Bitcoin (BTC) non-deliverable option, making it one of the first OTC crypto transactions by a major US bank.
“We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy,” said Max Minton, Asia Pacific head of digital assets at Goldman Sachs. He noted that the advancement is significant for Goldman Sachs’ digital assets capabilities and the “broader evolution of the asset class.”
With Galaxy Digital, the investment bank traded a bitcoin-linked instrument known as a non-deliverable option. Goldman Sachs and other major financial institutions’ embrace of bitcoin has aided in the growth of the digital coin and the broader cryptocurrency market.
The market for bitcoin derivative instruments is largely dominated by crypto-native firms such as Galaxy, Genesis, and GSR Markets.
According to Goldman and Galaxy, hedge funds are looking for derivative exposure to bitcoin, speculating on its price without directly owning it or hedging existing exposure.
Galaxy announced last June that it would be Goldman’s liquidity provider for bitcoin futures block trades on the CME exchange. By acting as a principal in the transactions, Goldman is taking on more risk.
According to SEC filings, Goldman Sachs also exposes its clients to the Ether cryptocurrency (ETH) through Galaxy Digital’s Ethereum Fund.
“This marks the first OTC crypto transaction by a major bank in the U.S. as Goldman Sachs continues expanding its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions,” Galaxy said. Former Goldman Sachs partner Michael Novogratz founded Galaxy.
Last year, the crypto market reached a valuation of more than $3 trillion before falling to $1.9 trillion.
Bitcoin has fallen by 12% this year, following a 60% increase in 2021. On Monday, it was trading near $41,000. Last year, Bitcoin reached an all-time high of more than $65,000.