Bloomberg reported on Monday that Goldman Sachs has begun trading a sort of derivative linked to Ethereum.
Goldman Sachs Launches Derivative Product
As a torrent of institutional money entered the market in 2021, the investment bank relaunched its crypto activities, with the core of its services focusing around derivatives tied to cryptocurrencies like bitcoin.
Goldman has started a derivatives product related to the price of ether, against a chaotic backdrop – the prospect of an ETH-linked derivative product was first suggested by the firm in June 2021.
This was Goldman’s first over-the-counter (OTC) non-deliverable forward (NDF) crypto trade on ether, according to a statement released on Monday, with Marex serving as the counterparty. The trade was organized by Marex Solutions, Marex’s hedging and investment solutions division.
ETH/USD plunges to 2-year low. Source: TradingView
A non-deliverable forward (NDF) is a derivative contract that allows the holder to gain exposure to an asset without actually owning it. This pays out in cash at the time of settlement, dependent on the price of ether.
Goldman’s action demonstrates institutional interest in cryptocurrencies at a time when the market is still reeling from the collapse of stablecoin TerraUSD (UST) and a bleak macroeconomic outlook.
Related article | Coinbase And Goldman Sachs Join Forces On First Bitcoin-Backed Loan
Crypto Faces Regulatory Hurdles
Banks and other significant financial organizations are forming internal crypto working groups and trading desks, as well as developing future funds. Auditors and custody providers, for example, are already providing services and are aiming to expand. Traditional huge payment companies aren’t waiting for disruption to happen to them: In the most recent quarter, Visa’s crypto-linked credit card usage was $2.5 billion, thanks to 65 crypto-wallet partners.
The largest challenge the crypto sector has and has been campaigning for a solution to is more regulatory certainty, which would imply fewer risk and compliance worries and even more adoption. The executive order signed by US President Joe Biden highlighted a coordinated approach by US government agencies to better understand and give future legal certainty for digital assets.
The SEC may be interested in crypto trading platforms and tokens, as head Gary Gensler has stated that they are similar to regular securities and must follow the same laws.
The Financial Conduct Authority in the United Kingdom has also indicated that crypto regulation will be tightened. Meanwhile, European politicians have just passed a widely panned bill that will make all anonymous crypto transactions illegal, a move that crypto industry participants fear will hinder privacy and innovation. Government and regulators recognize they need to do something, according to Noah Perlman, COO of Gemini Exchange, so they either say they’ll conduct a study or claim they’re putting a plan in place for a plan.
Related reading | Wall Street Giant Goldman Sachs Makes History, Offers First Bitcoin-Backed Loan
Featured image from Getty Images, chart from TradingView.com
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