Goldman Sachs Becomes the First U.S. Bank to Execute A Crypto Options Trade

On Monday, March 21, Wall Street giant Goldman Sachs became the first U.S. bank to execute an over-the-counter (OTC) crypto option trade in partnership with investment firm Galaxy Digital.

This serves as a big milestone for the crypto derivatives market as it sees participation even from traditional financial institutions. Furthermore, the move from Goldman Sachs is also seen as a notable step in developing the crypto industry for institutional investors.

Last year, Goldman Sachs gained exposure to crypto derivative products by trading the exchange-based CME Group Bitcoin products. Not acting as a principle in the crypto options trade, Goldman is taking even bigger risks.

Galaxy co-President Damien Vanderwilt said that Goldman’s involvement in the crypto options trade signals that crypto is maturing as an asset class. 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”.

He further told CNBC that the options trades are much more systematically relevant to markets compared to cleared futures or other exchange-based products,” Vanderwilt said. 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.”

Hedge funds have been seeking derivatives exposure to Bitcoin and crypto, especially to products that prevent any direct exposure to the crypto asset class. Options trading is getting popularity in the crypto space as it allows to buy and sell contracts that bet on the crypto assets. However, the market for these instruments is controlled by three major firms Galaxy, Genesis and GSR Markets.

Galaxy Digital, owned by former Goldman Sachs veteran Mike Novogratz, has been specialising in offering crypto derivative products to institutional players. It majorly focuses on offer deep and diverse liquidity to clients across different centralized exchanges and OTC markets. Galaxy Digital has also formed strong relationships with other stakeholders in the ecosystem like crypto custodians and fiat banking partners.

Galaxy Digital’s crypto trading platform offers liquidity to more than 100 digital assets. Speaking of the development, Max Minton, Asia Pacific head of digital assets for Goldman Sachs said: "We are pleased to have executed our first cash-settled crypto currency options trade with Galaxy. This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”