Goldman Sachs Sees Spike in Crypto Options Engagement Among Hedge Funds

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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March 25, 2024 00:48 EDT

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Goldman Sachs’ hedge fund clients are reportedly showing increased interest in crypto derivatives, spurred by the resurgence of the crypto market.

The bank officially launched its crypto trading desk in 2021. It then began to facilitate various Bitcoin-linked trades, including Bitcoin non-deliverable futures and CME BTC futures, following years of contemplation dating back to 2017.

Currently, Goldman offers cash-settled Bitcoin and Ether option trading, alongside CME-listed Bitcoin and Ether futures. However, it does not directly trade the actual underlying crypto tokens themselves.

Max Minton, Goldman’s Asia Pacific head of digital assets, told Bloomberg in a recent interview that the recent approval of ETFs has reignited interest and activity among the bank’s clients. Minton noted that many clients are either currently active in the crypto space or are considering entering it.

Goldman Sachs Clients Embrace Crypto Derivatives for Diverse Purposes

According to Minton, there has been a noticeable increase in client interest, onboarding, pipeline, and trading volume since the beginning of the year.

A majority of this demand stems from Goldman’s existing clients, particularly traditional hedge funds. However, the bank is also broadening its client base to include asset managers, banking clients, and specific digital asset firms.

He mentioned that clients are using crypto derivatives for various purposes, such as directional bets, yield enhancement, and hedging.

Bitcoin ETF Launch Sparks Market Optimism

The development follows Bitcoin’s recent surge to a record high above $72,000, triggered by the Bitcoin ETF launch and anticipation around the upcoming halving event.

Despite Bitcoin retracing to around $67,075 as of Monday, the outlook for crypto derivatives remains bullish. A quarterly report from Genesis Trading last year predicted substantial expansion in this sector, driven by a significant decrease in spot market liquidity and a growing trend towards the use of derivative instruments.

Currently, most Goldman clients appear to be primarily focused on Bitcoin-related products. However, there is potential for a shift in interest towards Ether-related products if Ether ETFs receive approval in the US.

Mathew McDermott, Goldman’s head of digital assets, expressed optimism about the approval of Ether ETFs back in January.

The SEC is expected to make its initial ruling on a spot Ethereum ETF by May 23.