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.
With no fanfare launch, it seems Goldman Sachs are treading lightly with the surreptitious launch of this investment bank backed Bitcoin trade.
Published October 31, 2018 — 13:29 UTC