Multinational investment bank Goldman Sachs is now exploring the provision of bilateral crypto options, deepening its involvement with crypto derivatives trading for institutions. They will purportedly allow holders such as Bitcoin miners and hedge funds to either hedge their risks, or boost yields with customizable offerings.
The crypto options market
The bank’s plans were reported by sources familiar with the matter who chose to remain anonymous, according to Bloomberg. Apparently, Goldman is just one of several Wall Street banks that have begun to explore these options.
An ‘option’ is a financial instrument that gives investors the opportunity to purchase or sell a security or cryptocurrency at a predetermined price in the future. ‘Call’ options are those that give holders permission to buy the cryptocurrency, while ‘put’ options give permission to sell.
Each options contract has an expiration date on which holders must choose to redeem it. However, they do allow traders/investors to benefit from the volatility of an underlying cryptocurrency without being fully exposed to its risks.
The market for these options contracts is available but currently dominated by crypto-native companies. Examples include crypto broker Genesis Global, crypto market maker GSR, and investment manager Galaxy Digital. However, a more traditional platform in the Chicago Mercantile Exchange (CME) will also offer micro Bitcoin and Ethereum options trading by the end of the month.
Major Wall Street banks have so far been barred from entering the crypto spot market due to regulatory uncertainty. Fortunately, President Biden’s executive order signed Wednesday is designed to organize research and industry regulatory authority among various federal agencies. According to SEC Chairman Gary Gensler, the crypto market should gradually move towards regulation in stride.
Regulation has also proven a roadblock for Binance after it was forced to stop its futures and options trading in Australia.
Goldman’s involvement in crypto
Goldman Sachs has a lot to say about crypto and has already been involved in the industry in a number of ways. In July, the bank filed a “DeFi” ETF that would closely track the performance of the decentralized finance space. That said, many companies she intended to follow were not related to DeFi at all.
In January, a former Goldman CEO told CNBC that crypto is definitely “happening” even if he doesn’t fully understand it yet. However, the company now believes that even if adoption persists, it may not push the prices of crypto assets higher.
