According to a direct source, investment banking Goliath Goldman Sachs is launching Bitcoin derivatives, reports The Block.
It has been confirmed that Goldman Sachs has been signing up a few select clients to its “Bitcoin non-deliverable forward contracts.” That’s fancy banker speak for a type of derivative.
For the uninitiated, a derivative is a financial security, the value of which is derived from an underlying asset. Typically, derivatives are a type of futures contract between two parties to sell an asset once it reaches an agreed price. Unlike a futures contract though, derivatives are not traded on an exchange.
Imagine David has 1 BTC valued at $6,500 and enters a futures contract with me. I would contractually agree to buy that Bitcoin for $6,500 in a year’s time. For David, the value of his hodling is secured, but if the price of BTC inflates to say $10,000 I am going to make an immediate profit of $3,500. But equally, if the value of David’s BTC drops to $3,000 I still have to buy it from David for the $6,500 we agreed.
Goldman has been mulling over how to get into the cryptocurrency space for a while. In early September it was rumored that the bank ditched its trading desk, days later it reaffirmed its interest in delivering cryptocurrency products.
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With no fanfare launch, it seems Goldman Sachs are treading lightly with the surreptitious launch of this investment bank backed Bitcoin trade.
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