Goldman Sachs is offering bitcoin derivatives to investors as it expands its offerings in the $1 trillion market

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Goldman Sachs is offering bitcoin derivatives to investors as it expands its offerings in the $1 trillion market
Representations of virtual currency bitcoin are placed on US dollar banknotes taken May 26, 2020.REUTERS/Dado Ruvic
  • Goldman Sachs on Thursday has started trading with non-deliverable forwards, Bloomberg Law reported.
  • An NDF will essentially allow investors to speculate on bitcoin's future price
  • The bank will be hedging with CME futures.

Goldman Sachs on Thursday began trading non-deliverable forwards, a derivative product tied to bitcoin's price, Bloomberg Law reported.

An NDF essentially allows investors to speculate on bitcoin's future price. It is settled with cash and is usually a short-term, forward contract.

Goldman can protect its clients from the volatility of bitcoin's price by buying and selling bitcoin futures in block trades on CME Group, using Cumberland DRW as its trading partner, Bloomberg Law reported.

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The bank first announced its intention of dealing with bitcoin futures and NDFs in March.

Goldman also in the same month restarted its cryptocurrency trading desk amid a booming cryptocurrency market. It first set up a cryptocurrency desk in 2018.

Bitcoin, since its inception in 2009, has long been shunned by Wall Street firms until recently.

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In March, Morgan Stanley became the first major American bank to offer its wealth management clients access to bitcoin funds, allowing clients ownership of the cryptocurrency.

JPMorgan followed in April when it announced that its plans to offer an actively managed bitcoin fund to wealth clients for the first time.

Banks are still moving cautiously when it comes to holding bitcoin outright due to regulatory intricacies. This is why some have resorted to derivatives.

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Bitcoin has seen a 91% gain year-to-date. It briefly breached a record high over $64,000 ahead of cryptocurrency exchange Coinbase's direct listing, then plummeted by around 36% to $47,000 around 10 days later.

It is trading lower by 1.07% to $55,905 as of 4:15 p.m. ET.

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