Through its trading partner Galaxy Digital Holdings Ltd, Goldman Sachs Group Inc. (GS) completed its first over-the-counter (OTC) crypto trade (GLXY).

Goldman’s Bitcoin (BTC) transaction is a non-deliverable (NDO), commonly referred to as a cash-settled option. This means that instead of receiving Bitcoin, the option holder receives the cash value of the opportunity. This is the first time a big American bank has done something like this. Goldman’s transaction is a change from the firm’s previous digital trades for CME Group, indicating its readiness to take on the additional risk of an OTC deal. 

Without a centralized exchange, an OTC deal is carried out directly between counterparties.

TAKEAWAYS:

• Goldman Sachs completed the first Bitcoin over-the-counter (OTC) trade, indicating that cryptocurrencies are becoming more widely accepted by institutions.

• At maturity, the non-deliverable option facilitated by Goldman trading partner Galaxy will settle in cash.

• Bitcoin is on an inflation hedge, and Goldman’s first BTC OTC trade comes when global inflation is on the rise.

Galaxy Digital’s Partnership With Goldman Sachs

Galaxy has served as Goldman’s liquidity provider for cryptocurrencies in the spot market, futures, digital asset exchanges, and transactions with fiat banking institutions.

Also, read – Most Significant Moves Of Bitcoin Trading

Goldman Sachs asked Galaxy Digtal to launch its Bitcoin futures trading product for the CME Group in June 2021. Through Galaxy’s Ethereum Fund, Goldman has begun to offer its investors exposure to the digital currency Ethereum (ETH). Goldman inaugurated its Bitcoin trading desk in May 2021 and began issuing Bitcoin non-deliverable forwards, which have a price related to Bitcoin’s. Galaxy is a digital asset exchange that offers over 100 digital assets and supports trades on central exchanges and over-the-counter markets.

Bitcoin OTC trade with Goldman Sachs

The Final Word

For the first time, Goldman is enabling direct customizable crypto trading for investors by executing an OTC deal and using Galaxy as the liquidity provider for its crypto options trade. This first OTC crypto transaction in the face of rising inflation raises the question of whether Bitcoin is a good inflation hedge. Bitcoin’s strict limit of 21 million units, dubbed “digital gold,” is intended to counteract the devaluation of fiat currency. However, because this trading is done as cash-settled options, it may negate Bitcoin’s apparent ability to hedge against fiat currency devaluation.

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— Goldman Sachs (@GoldmanSachs) March 17, 2022