Kazantsev explained the logic that allows Goldman Sachs to execute trades with larger national values. He observed that cryptocurrency options could hedge existing risks or take on additional market exposure.
American financial services company Goldman Sachs (NYSE: GS) has advocated that more options markets for cryptocurrencies should be developed. As the Wall Street giant projected, a growing number of traditional financial firms are adopting crypto assets.
According to Goldman’s global head of crypto trading, Andrei Kazantsev, there is an increasing demand for “more derivative-type hedging.”
Kazantsev added that the next big step Goldman Sachs is envisioning is the development of options markets.
More Crypto Option Markets Is the Next Major Development for Crypto, Goldman Sachs Says
Kazantsev, on Thursday during a panel discussion hosted by CoinDesk, observed that while traditional markets such as equities or foreign exchange appear more known and acceptable, cryptocurrencies are at an infant stage but with growing acceptability. Bitcoin was singled out as a cryptocurrency that has broken barriers and attained steady growth in recent years.
Skew, a subsidiary of Coinbase that tracks data on cryptocurrency derivatives markets, made available some data. This data revealed that the total value of outstanding Bitcoin contracts in public space is at an estimation of $12 billion.
Kazantsev explained the logic that allows Goldman Sachs to execute trades with larger national values. He observed that cryptocurrency options could hedge existing risks or take on additional market exposure.
“There might be equity funds that have an exposure to a stock that has underlying bitcoin holdings,” explained Kazantsev. “In order to hedge that exposure, they might trade futures against that. For them, rather than rebalancing the portfolio dynamically, what they really want to do is hedge for the longer term, and to know the downside on the hedge that they can have. That’s where options become really important.”
“There are more versatile possibilities to hedge specific exposures with options than with futures alone,” added Kazantsev.
Goldman Sachs Stock Performance
Goldman Sachs was up 0.51% to $389.50 in the pre-market trading and is 1.72% down now when the marker is already opened. The company has had a good performance record over the past year, growing nearly 62% over the last twelve months. Also, the financial services provider has jumped 46.96% since the year began.
However, the company has been declining in the last three months. GS shed 5.78% over the past three months and dropped further by 4,80% in a month. In the last five days, Goldman Sachs has lost 0.48%.
Earlier this year, Goldman Sachs, based on interest from clients’ roster, including hedge funds, endowments, and other institutional money managers, brought back a cryptocurrency trading desk. The trading desk is to provide principal liquidity for CME Group’s crypto-related futures and over-the-counter equivalents. Principal liquidity implies Goldman Sachs takes the other side of the buy or sell trade, resulting in a new risk position in the bank’s internal holdings.
“We’re active in providing liquidity and taking risk on behalf of our clients and in the market,” said Kazantsev.
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