Goldman Sachs just became the first major U.S. bank to have made an over-the-counter (OTC) cryptocurrency transaction, according to an announcement made public last week.
The Wall Street giant bought an OTC Bitcoin non-deliverable option (NDO) from Mike Novogratz’s Galaxy Digital (GLXY). While an OTC Bitcoin NDO sounds complicated, it essentially means Goldman Sachs bought a contract betting on the future price of Bitcoin – rather than actually buying the digital asset itself.
Compared to the Bitcoin futures products Goldman began trading last year, the OTC options are more systematically relevant to the markets. At a high level, Goldman is taking on more risk and is further implying their trust in crypto’s maturity to date.
The Bigger Picture
Slowly, then all at once. This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients – a small but massive step in the institutionalization of crypto assets.
Side Note: Given that Galaxy Digital – what we often like to refer as the JPMorgan or Goldman Sachs of crypto – continues to strengthen its institutional footprint, we cannot help but wonder how long it will take before the company gets listed on the Nasdaq. Largely thanks to the announcement, the stock is up roughly 44% since March 1st.