Goldman Sachs and Galaxy Digital Execute OTC Trade With Cash-Settled Bitcoin Option

Galaxy Digital’s trading division facilitated the first OTC cryptocurrency transaction with Goldman Sachs. The transaction was conducted in the form of a cash-settled bitcoin option.

A cash-settled option is a contract that, at maturity, pays out based on the difference between the market value of the underlying asset and its agreed-upon price. No physical delivery occurs in such contracts.

According to the press release, Goldman Sachs was the first U.S. bank to execute an OTC cryptocurrency trade. The parties said they intend to continue collaborating on digital-asset operations.

In 2021, Galaxy Digital became a liquidity provider for Goldman Sachs in bitcoin futures trades on the Chicago Mercantile Exchange (CME).

In a conversation with CNBC, a representative of the cryptocurrency bank noted that, compared with the CME deal, the new transaction carries greater risk, because Goldman Sachs acts as principal in the transaction.

The parties emphasised that institutional investors are seeking cryptocurrency derivatives to hedge their positions or to speculate, without implying direct ownership of the digital assets.

In March 2022, Bloomberg reported that Goldman Sachs was considering offering over-the-counter bilateral cryptocurrency options to its clients.

Earlier, in 2021 Goldman Sachs offered clients trading futures and options on Bitcoin and Ethereum. The bank also launched over-the-counter forwards on Bitcoin with fiat settlement.

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