Goldman Sachs expands crypto ambitions beyond Bitcoin, plans Ether trading options
Investment banks like Goldman Sachs are stepping up to offer Bitcoin services to their big clients, despite all the warnings from regulators about the risks posed by crypto’s extreme volatility and role in money laundering.
Goldman Sachs Group is moving beyond the world of Bitcoin and expanding into Ether. The bank plans to offer options and futures trading in Ether, the coin that fuels the Ethereum network, in the coming months, according to Mathew McDermott, head of digital assets at Goldman.
It's the latest step in the Wall Street giant's crypto ambitions after Goldman restarted a trading desk this year to help clients deal in publicly traded futures tied to Bitcoin. McDermott said the bank also plans to facilitate trades via exchange-traded notes tracking Bitcoin.
Despite all the warnings from regulators about the risks posed by crypto's extreme volatility and role in money laundering, investment banks are stepping up to offer Bitcoin services to their big clients. Even after prices plummeted in May, falling from about $60,000 to $33,000 in a matter of days, hedge funds are still enthusiastic to trade Bitcoin.
“We've actually seen a lot of interest from clients who are eager to trade as they find these levels as a slightly more palatable entry point,” McDermott said in a phone interview on Thursday. “We see it as a cleansing exercise to reduce some of the leverage and the excess in the system, especially from a retail perspective.”
Goldman tapped McDermott, 47, to head its digital currency efforts last year. Under his watch, the business has grown to 17 people from four.
The bank has also invested in crypto start-ups. It put $5 million into a fundraising round by Blockdaemon, a firm that creates and hosts the computer nodes that make up blockchain networks.
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In May, Goldman led the $15 million investment into Coin Metrics, a cryptocurrency and blockchain data provider to institutional clients, and McDermott joined the company's board.
“We are looking at a number of different companies that fit into our strategic direction,” he said.
Other banks have also expanded their crypto operations. Cowen Inc. plans to offer “institutional-grade” custody services for cryptocurrencies. Standard Chartered Plc is setting up a joint venture to buy and sell virtual currencies, though HSBC Holdings Plc is avoiding Bitcoin for now.
McDermott said his conversations with clients show that digital currencies aren't just a passing fad. In a survey of 850 institutions last week, Goldman found that close to one in 10 are trading crypto, and 20% are interested in it.
“Institutional adoption will continue,” he said. “Despite the material price correction, we continue to see a significant amount of interest in this space.”
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