Goldman Sachs Teams with Galaxy to Meet Institutional Digital Asset Demand

Wall Street titan’s latest partnership the latest step in its expansion to digital assets realm

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key takeaways

  • Partnership comes amid increasing demand from institutions and could result in broader adoption of cryptocurrencies.
  • Galaxy works with more than 300 institutional trading counterparties and added more than 100 new relationships in Q1

Goldman Sachs has continued the expansion of its digital asset offering by naming Galaxy Digital the liquidity provider for its bitcoin futures block trades on CME Group, the company announced Friday. 

The move comes after Goldman Sachs announced a digital asset strategy in May that included offering bitcoin derivatives and opening a dedicated trading desk for cryptocurrency.

Galaxy, a New York-based financial services firm specializing in the digital asset, cryptocurrency, and blockchain technology sectors, will offer clients of the Wall Street titan access to deep and diverse liquidity on a variety of centralized exchanges and OTC markets.

“Our goal is to equip our clients with best execution pricing and secure access to the assets they want to trade,” Max Minton, head of digital assets for Goldman Sachs’ Asia-Pacific division, said in a statement. “In 2021, this now includes crypto, and we are pleased to have found a partner with a broad range of liquidity venues and differentiated derivatives capabilities spanning the cryptocurrency ecosystem to help fulfill this goal.”

Galaxy serves as a market maker in over 90 digital assets and works with more than 300 institutional trading counterparties. It added more than 100 new relationships in this year’s first quarter.

The bank’s partnership with the crypto company will help meet the increasing demand from institutions and pave the way to broader adoption of cryptocurrencies as an asset class, according to Damien Vanderwilt, Galaxy’s co-president and head of global markets.

Galaxy founder and CEO Michael Novogratz said in February that the company “once sat waiting for the institutions to come, now I can’t hire people fast enough.”

Novogratz had predicted that bitcoin would reach $100,000 by the end of 2021. The cryptocurrency’s price, which reached a peak of over $63,000 in April, was slightly under $36,500 on Friday afternoon. 

In terms of institutional demand, 98% of hedge funds expect to invest in cryptocurrencies in some capacity in the next five years, a recent survey by fund administrator Intertrust Group found. About one in six of those surveyed plan to invest at least 10% in crypto in that span.

Billionaire Steve Cohen, CEO of hedge fund manager Point72, said during a recent webinar hosted by Stray Reflections founder Jawad Mian that he has been looking into crypto and is now “fully converted.”

“I don’t care about Bitcoin; I care more about the technology behind the blockchain and how transformational it is and how disruptive it could be,” he explained. “I feel like the way those markets are developing could be a real interesting adjacency to what we do at Point72, and so I’m not missing this.”

Goldman Sachs is also planning on launching an Ether futures and options trading platform, Matthew McDermott, the firm’s digital assets head, told Bloomberg earlier this week. The executive noted that some clients view the current levels of the crypto market as “a slightly more palatable entry point.”

A Goldman Sachs spokesperson declined to comment further on the decision to partner with Galaxy and its next steps in the crypto space.

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