Goldman Sachs launched a derivatives product based on the price of bitcoin for its clients last month, though it did not announce the move at the time.
“The investment bank has opened up trading with non-deliverable forwards, a derivative tied to bitcoin’s price that pays out in cash,” Bloomberg reported. “The firm then protects itself from the digital currency’s famous volatility by buying and selling bitcoin futures in block trades on CME Group Inc., using Cumberland DRW as its trading partner.”
Non-deliverable forwards entail contracts between two parties that will settle the difference between the spot price and the contracted price at a certain date in the future. The product essentially gives Goldman clients the ability to speculate on bitcoin’s future price, an increasingly popular offering.
“Institutional demand continues to grow significantly in this space, and being able to work with partners like Cumberland will help us expand our capabilities,” Goldman’s Asia-Pacific head of digital assets, Max Minton, told Bloomberg. “The new offering is ‘paving the way for us to evolve our nascent cash-settled cryptocurrency capabilities.’”
Goldman also just informed its markets personnel that a newly-formed cryptocurrency trading desk at the firm had successfully traded the non-deliverable forwards, as well as another bitcoin-tied derivative, CNBC reported.
“The derivatives it traded, bitcoin futures and non-deliverable forwards, are ways to wager on the price of bitcoin,” per the CNBC report. “The contracts are settled in cash and don’t require that Goldman deals with actual bitcoin … because the bank isn’t yet in a position to do so.”
Goldman’s increasing adoption of bitcoin-tied financial products is a bellwether for the asset’s growing reputation on Wall Street and among institutional investors. In March, the investment bank announced that it would soon be offering bitcoin investment vehicles for its private wealth clients.