Banking giant Goldman Sachs has moved to offer derivatives products tied to the price of Bitcoin to its clients, according to Bloomberg’s Matt Leising.
A derivative is a financial security with a value that is reliant upon or derived from, an underlying asset or group of assets a benchmark. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset.
Therefore, these NDFs allow Goldman clients to speculate on the price of bitcoin. Goldman says, “The contracts pay in cash and on Goldman’s side, the firm protects itself from the digital currency’s famous volatility”. Goldman purchases Bitcoin futures in block trades on CME Group Inc. using Cumberland DRW as its trading partner,” per Bloomberg.
The new derivatives product was quietly introduced to Goldman’s clients last month. The bank re-launched its crypto trading desk and announced its plan to dabble in crypto custody. Goldman has also spearheaded a $15 million funding round in cryptocurrency data analytics startup CoinMetrics.
