Back in 2011, punters would pontificate about the future of bitcoin and cryptocurrencies in general by noting that the prices would go to the moon when the big guns got involved. Get in now. When Goldman’s involved we’ll be rolling. Well, Goldman’s involved and admittedly we’ve been rolling all year—being up 285%, but actually down 43.7% from an all-time charging high of $64,804.74—but now we’re mostly waiting to see if this prediction is spot on.
Galaxy Digital Holdings (GLXY.T) and Goldman Sachs Group have reached an agreement wherein Galaxy will be the official liquidity provider for Goldman’s Bitcoin futures block trading on CME Group.
Galaxy coming on as a liquidity provider comes on the heels of Goldman Sachs’ first crypto trades since they set up their formal bitcoin desk last week, two weeks after they announced they were re-entering the crypto-market as a response to growing demand.
“Our goal is to equip our clients with best execution pricing and secure access to the assets they want to trade. In 2021, this now includes crypto, and we are pleased to have found a partner with a broad range of liquidity venues and differentiated derivatives capabilities spanning the cryptocurrency ecosystem to help fulfill this goal,” said Max Minton, head of digital assets for Goldman Sachs’ Asia-Pacific Division.
Before we go any further we should ask the question:
What are futures?
Here’s what Investopedia has to say:
“Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date. Underlying assets include physical commodities or other financial instruments. Futures contracts detail the quantity of the underlying asset and are standardized to facilitate trading on a futures exchange. Futures can be used for hedging or trade speculation.”
You buy Bitcoin today at $36,483.44 a coin with the hope and prayer that it’s going to go up, but because you’ve got the fear, you also attach a future’s contract to it that you’ll sell at a set price at a set date in the future. Say $40K in six months. If Bitcoin is worth $6 in six months, you still come out ahead. If it hits $100,000, then you’re out a substantial amount. Take your $3,516.56 profit per coin home and cry.
Actually, most of the folks reading this won’t have to worry about Bitcoin futures. Those types of financial instruments are generally for the institutional crowd—like those to whom Goldman Sachs caters.
Bitcoin futures aren’t a new thing. They’ve been offered by various companies for years. But this marks the first time that a company like Goldman has arrived, mostly to shore up their holdings for future hedge fund offerings, in the cryptocurrency. Even despite the recent slowdown, there’s still high demand for cryptocurrency trading in banks.
According to a Cornerstone Advisors survey of 3,898 US consumers from December 2020, 15% of US consumers own Bitcoin or one of the altcoins. Also, and perhaps more pertinent to today’s news, 60% of crypto owners would use their bank to invest in crypto. Given that this was almost seven months ago, and Bitcoin’s gone through enough volatility to make a jet pilot dizzy, there’s a solid chance these numbers have gone up drastically.
“Goldman’s trust in us validates our institutional expertise and the strength of what we’re building here at Galaxy. We are proud to be a strategic partner of Goldman and look forward to working with Max and his team to meet the increasing demand from institutions and pave the way to broader adoption of cryptocurrencies as an asset class,” said Damien Vanderwilt, co-president and head of global markets at Galaxy Digital.
Galaxy Digital trading deals in over 90 digital assets, with a focus on the expanding requirements of its counterparties in the sector. They work with over 300 institutional trading counterparties and have added 100 more in Q1 2021 alone.
—Joseph Morton
