Goldman Sachs, one of the most well-known investment banking and financial services providers in the world, announced plans to trade bitcoin futures contracts – a Wall Street first. Goldman’s competitors like JP Morgan have so far shunned the risks and volatility associated with trading bitcoin and have yet to make public forays into the space.
What Exactly Is Goldman Trading?
In the next few weeks, the firm plans to deploy its own capital to buy and sell bitcoin futures contracts and non-deliverable forwards, or futures with greater flexibility, on behalf of their institutional clients.
Futures contracts are legally binding agreements that allow purchasers to buy or sell assets at a fixed price at a specified time in the future. Traditionally, futures contracts are used to hedge exposure or to “go long” on an asset if a trader believes price will increase.
It is important to note that bitcoin futures enable Goldman to trade on the underlying bitcoin cryptocurrency, without being directly exposed to it. Goldman will not (yet) come directly into contact with the Bitcoin blockchain.
Justin Schmidt, Goldman’s first digital asset trader, will handle the firm’s bitcoin trading efforts. As reported by The New York Times, Schmidt is considering trading bitcoin itself, provided Goldman can secure regulatory approval and mitigate the risks associated with holding cryptocurrency.
Why Is Goldman Trading Bitcoin?
Goldman cites client interest as a catalyst for their entry into the bitcoin space. Traditional clients have indicated that they would like to hold bitcoin as a scarce commodity, similar to gold. Hedge funds and endowments have also reached out to Goldman asking for best custodial practices for storing and handling newly received bitcoin donations.
Since the financial crisis, Goldman has emphasized a technology-first approach and is perhaps trying to gain a strategic advantage over
