Founded in 2018, Galaxy Digital sought to bridge the gap between Wall Street and crypto. Three years later, the firm appears to be living up to this ambition in a partnership with Goldman Sachs.
According to a press release, the New York-based broker-dealer will become a liquidity provider for the investment bank’s Bitcoin futures trading desk, which Goldman relaunched last month after shelving it in 2018 due to regulatory uncertainty. CNBC first revealed the news on Friday.
The Mike Novogratz-led firm will help Goldman's clients trade the Chicago Mercantile Exchange’s (CME) Bitcoin futures product. The CME launched this product in 2017.
Liquidity providers, sometimes called market makers, buy up large portions of a specific asset before selling them to anyone that'll buy them. The point is that Goldman's clients can always buy a cryptocurrency, no matter the condition of the market.
Reports in May indicated that Goldman had already started trading Bitcoin futures with the help of another liquidity provider, Cumberland DRW. Today, Goldman is adding Galaxy Digital as a liquidity provider to continue expanding its trading desk.
Galaxy will join Cumberland in buying up futures contracts. This is a widely traded agreement that obligates a trader to buy or sell Bitcoin at a specific time, quantity, and price.
If a trader takes out a contract to buy one Bitcoin for $30,000 in October, she must buy the asset at that price come October. If Bitcoin’s price exceeds $30,000 (and any fees she paid) she can resell that Bitcoin for a profit. The opposite is true for the contract’s seller.
The Goldman Sachs crypto adventure
Earlier this week, the Wall Street bank also rolled out a similar offering for Ethereum futures and options. Both desks stand in stark contrast to a recent report in which the bank said that cryptocurrencies are not “a viable investment.” The bank added that American equities are a far more effective inflation hedge than any "digital gold".
But as with many financial institutions, money is money. If enough clients want access to cryptocurrency markets and their infamous volatility, Goldman Sachs is clearly more than happy to serve this interest.