22nd March 2022 > > Goldman Sachs.

tl;dr

Goldman Sachs executes the first over-the-counter (OTC) option opening the door to ever greater institutional adoption of cryptos.

Market Snap (at time of writing)

Market Wrap

That is a big move for US Treasuries, knocking nearly a point and a half off the price of almost any 10-year bond. This is going to cause corporates and governments a lot of pain as the world must adjust to a significantly lower level of indebtedness after the madness of quantitative easing (QE).

I wonder if the politicians have any real sense of what the bond markets are about to unleash on us all.

Occasional Series – Knoydart

The CCC is holidaying again, this time in Knoydart, whilst also investigating some alternative, temporary, premises for CCC towers.

Back Monday …

Curious Cryptos’ Commentary – Goldman Sachs

Goldman Sachs, always sensitive to the needs of its clients, has become increasingly involved in the crypto space.

After initially planning to launch a crypto trading desk in 2018, a plan which was put on hold in light of the sell-off in the broader crypto market that year, the desk was established in March 2021. To date it has focussed on trading cash-settled futures for clients but as a broker rather than a risk taker. Liquidity is provided by Galaxy Digital who themselves have hundreds of institutional clients.

Now it has announced the execution of the first OTC (over-the-counter) crypto transaction by an investment bank with Galaxy Digital. The trade itself is a cash-settled option, but the press release does not make it clear whether it was a put or a call, or whether Goldman Sachs was the buyer or the seller.

This is what the protagonists had to say.

First up, Max Minton, Asia Pacific head of digital assets for Goldman Sachs:

"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."

Damien Vanderwilt, co-president, and head of global markets at Galaxy Digital:

"We are pleased to continue to strengthen our relationship with Goldman and expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets."

…

On the face of it, you might be feeling unimpressed by this news, but personally I think it is very important.

This is an indication that the crypto market is maturing. Liquidity can always a problem, but the fact that buyers and sellers of volatility are agreeing on a price with each other is a huge step in the right direction.

One can only assume that the margins on such products currently are at the very least juicy. Other trading desks will be looking to get involved.

As for the client base - investors looking to invest, and institutions looking to hedge – they will gain confidence and trust in cryptos as the OTC market develops and matures, leading to ever greater adoption.

The growth of cryptos as an accepted and essential asset class will continue to drive crypto prices ever higher. We are just at the foothills of this process. It is going to be very exciting, and rewarding, to watch.