Goldman Sachs’ major investors have reignited their interest in cryptocurrency following the approval of the spot Bitcoin Exchange-Traded Fund (ETF). In 2022, there was little activity from these clients due to the failure of the 2022 FTX exchange. However, with the recent ETF approval, these clients are now showing signs of renewed activity. Max Minton, head of digital assets for Goldman Asia Pacific, stated that many large clients are either active or considering getting involved in the crypto market.
This resurgence was triggered by the approval of the ten-spot Bitcoin ETFs. Goldman Sachs previously discussed this impact in a post published by Crypto News Flash. The recent ETF approval has sparked a renewed interest and activity from our clients. Many of our largest clients are currently active or exploring the possibility of getting involved in the space.
In February 2023, Mathew McDermott, Goldman Sachs’ global head of digital assets, revealed that large investors were hesitant to reenter the market. McDermott highlighted the challenges of crypto adoption due to the lack of better regulated and capitalized entities. Additionally, the market pullbacks in 2022, following the FTX exchange collapse, caused most assets to trade at around 90% below their all-time highs, leading to the withdrawal of large investors. However, Goldman Sachs has consistently defended the industry and stated that crypto does not pose a major risk to the global economy.
Currently, the market is performing well, with Bitcoin trading at $67,018 after a 4% surge in the last 24 hours. Bitcoin has appreciated by 51.77% year-to-date.
Goldman’s crypto trading desk, launched in 2021, has experienced significant growth, offering cash-settled Bitcoin and Ether option trading, as well as CME-listed Bitcoin and Ether futures. Although last year was relatively quiet in the crypto market, this year has shown impressive runs, with Bitcoin reaching new all-time-high prices ahead of the anticipated halving event.
According to Minton, most of the current interest in crypto comes from existing clients, particularly traditional hedge funds. The bank is also working to expand its client base to include asset managers, bank clients, and selected digital asset firms.
Over the years, clients have largely utilized crypto derivatives for directional bets, yield enhancement, and hedging purposes. Goldman Sachs has $2.8 trillion in assets under management in 2023, and this is expected to grow significantly due to the increasing demand. While some clients are focusing on altcoins, Bitcoin remains the primary target. The degree of focus on Ethereum may change depending on the SEC’s decision on the Ether ETF.
Aside from crypto trading, Goldman Sachs also plays a role in traditional asset tokenization using blockchain technology. McDermott stated that the bank’s focus on crypto extends to tokenization, transforming the financial market’s infrastructure, and the impact of digital money on markets.
Goldman Sachs is excited about the potential impact of this technology on various parts of the financial system and its commercial implications. The bank recognizes that we are still in the early stages of adoption, but the growing number of financial institutions building digital asset teams and strategies is incredibly exciting.