Goldman Sachs to Launch Bitcoin Futures Contracts
Goldman Sachs is planning to launch a new cryptocurrency market on Wall Street by offering bitcoin futures contracts, a move that could strengthen institutional adoption of digital assets.
Goldman to Embrace Bitcoin
Bloomberg reported Wednesday that Goldman Sachs will begin offering bitcoin futures as part of a much larger effort to bring cryptocurrency to mainstream circles. Citing sources familiar with the matter, Bloomberg said the bank plans to start small by offering a limited suite of derivatives products that won’t actually trade bitcoins but offer contracts tied to the underlying asset.
Under the proposed system, Goldman will serve in a market-making capacity for futures contracts that track the performance of bitcoin. In other words, the bank will not operate a cryptocurrency trading desk initially but will instead focus on futures as well as non-deliverable forward products.
Though no timetable for launch has been provided, Goldman recently hired cryptocurrency trader Justin Schmidt to lead its digital asset division. Schmidt reportedly began his tenure at the bank on Apr. 16.
The Wall Street mega bank has been linked to cryptocurrency since the bull market began in early 2017. In December, it was reported that Goldman had decided to set up its own cryptocurrency trading desk by the end of June 2018.
Bitcoin prices rose earlier in the day as reports of Goldman’s new venture surfaced. At the time of writing, the digital currency was trading just above $9,200, having gained 1.6%.
Strengthening Institutional Adoption
For proponents of cryptocurrency, Goldman’s entry into the market is a significant milestone. Much like the launch of bitcoin futures last December, the presence of a major Wall Street bank is considered a harbinger for broader institutional adoption of digital assets. With respect to futures, initial uptake was low but demand has picked up significantly in recent weeks, according to the the CBOE Options Institute.
Not surprisingly, reports of greater institutional interest in cryptocurrency resurfaced last month as bitcoin rebounded more than 50% from its bear market low. The broader cryptocurrency market enjoyed a similar rally, with the total value of all assets in circulation rebounding nearly $190 billion from their previous low.
A recent report from Denmark’s Saxo Bank suggested that the cryptocurrency rally could be just getting started.
“The steep losses have driven industry consolidation. The rush to market was badly timed and a number of crypto asset hedge funds, exchanges, and ICOs have shut down already,” according to Jacob Pouncey, who authored a section on cryptocurrency that appeared in Saxo’s quarterly report.
That said, Pouncey listed several fundamental drivers for crypto’s resurgence in the second quarter, including the acquisition of Poloniex by Goldman-backed Circle as well as the acquisition of Coincheck by Monex Group. Then there’s Yahoo Japan, which purchased a 40% stake in a Tokyo exchange by the name of BitArg.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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