Goldman’s first over-the-counter crypto trade shows how digital currencies went from reject to hottest asset class on Wall Street

Marco Quiroz-Gutierrez

From rejecting crypto outright to embracing it full stop, Wall Street banks have completely changed their attitude on digital currencies in just a few years.<div class="paywall-selector"></div><div class="paywall">



On Monday, Goldman Sachs executed an over-the-counter crypto transaction, a first for a major U.S. bank, according to a press release by Galaxy Holdings Digital, the crypto financial services firm that facilitated the trade.



The bank traded a non-deliverable Bitcoin option, which is a derivative tied to the price of Bitcoin that pays out in cash instead of the underlying cryptocurrency. Galaxy Holding’s <a href="https://www.newswire.ca/news-releases/galaxy-digital-facilitates-goldman-sachs-s-first-otc-crypto-options-trade-830533375.html" target="_blank" rel="noreferrer noopener">press release</a> did not specify the size of the trade or if it was on behalf of a client or for the bank itself.&nbsp;



Galaxy Digital did not immediately respond to Fortune’s request for comment, and a spokesperson for Goldman Sachs referred Fortune to Galaxy Digital’s Monday press release.



&#8220;Goldman&#8217;s continuing trust in us is a testament to Galaxy&#8217;s expertise and ability to meet the evolving demands by institutions as crypto solidifies itself as the fifth asset class.&#8221; said Damien Vanderwilt, co-president, and head of global markets at Galaxy Digital in the press release.&nbsp;



<h2 class="wp-block-heading">Wall Street’s crypto about-face</h2>



At the end of 2021, the market valuation of the top 30 cryptocurrencies <a href="https://assets.coingecko.com/reports/2021-Year-End-Report/CoinGecko-2021-Report.pdf" target="_blank" rel="noreferrer noopener">was ​about $2 trillion</a>, according to CoinGecko, and this year, cryptocurrencies have attracted the attention of both banks and the bankers who are <a href="https://fortune.com/2022/03/07/jobs-in-crypto-hiring-wall-street-exodus/" target="_blank" rel="noreferrer noopener">leaving in droves to crypto companies</a>. The industry has even attracted the attention of President Biden, who <a href="https://fortune.com/2022/03/10/biden-executive-order-crypto-u-s-digital-currency-cbdc/" target="_blank" rel="noreferrer noopener">issued an executive order</a> to explore the pros and cons of digital currencies earlier this month. Goldman’s crypto trade is just the latest example of a major bank embracing an asset that was once untouchable.&nbsp;



In<a href="https://resources.goldman.com/content/dam/pwm/direct-links/isg-calls/client_call_materials_27May20.pdf?sa=n&amp;rd=n" target="_blank" rel="noreferrer noopener"> materials for a 2020 investor call</a>, Goldman said cryptocurrencies like Bitcoin were “not an asset class,” because they can’t generate cash flows like bonds, fail to generate earnings through exposure to global growth, and are a bad inflation hedge. It didn’t recommend it to clients.



“We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients,” the bank wrote in the document.&nbsp;



Other major banks and their executives have also raised doubts about cryptocurrencies in the past. <a href="https://fortune.com/company/jpmorgan-chase/" target="_blank">JPMorgan Chase</a> CEO Jamie Dimon has been one of cryptocurrencies most vocal detractors, even as his bank has made moves to embrace them. In 2017, Dimon <a href="https://www.cnbc.com/2017/09/12/jpmorgan-ceo-jamie-dimon-raises-flag-on-trading-revenue-sees-20-percent-fall-for-the-third-quarter.html" target="_blank" rel="noreferrer noopener">called Bitcoin a “fraud”</a> and last October he said<a href="https://www.cnbc.com/2021/10/11/jpmorgan-chase-ceo-jamie-dimon-says-bitcoin-is-worthless.html" target="_blank" rel="noreferrer noopener"> Bitcoin is “worthless.”&nbsp;</a>



JPMorgan, along with CitiGroup and <a href="https://fortune.com/company/bank-of-america-corp/" target="_blank">Bank of America</a>, said in 2018 that <a rel="noreferrer noopener" href="https://www.cnbc.com/2018/02/02/jpmorgan-chase-bank-of-america-bar-bitcoin-buys-with-a-credit-card.html" target="_blank">they wouldn’t allow customers to buy cryptocurrencies with their credit cards</a>. Bank of America took it one step further in 2018, banning financial advisers in its Merrill Lynch wealth management division<a rel="noreferrer noopener" href="https://www.cnbc.com/2018/01/03/merrill-lynch-bans-its-clients-advisors-from-trading-bitcoin-related-investments-report-says.html" target="_blank"> from buying crypto-related investments</a> for their clients.



Slowly, the tide has been turning at big Wall Street Banks and Goldman in particular. Apart from its over-the-counter trade Monday, the bank also <a href="https://www.coindesk.com/markets/2021/03/01/goldman-sachs-relaunching-crypto-trading-desk-after-3-year-pause/" target="_blank" rel="noreferrer noopener">relaunched a trading desk for cryptocurrencies</a> last year after closing it down for three-years amid dropping crypto prices. Last June, it started <a href="https://cointelegraph.com/news/goldman-sachs-to-offer-bitcoin-futures-trading-in-partnership-with-galaxy-digital" target="_blank" rel="noreferrer noopener">offering a Bitcoin futures trading product</a>, through another partnership with Galaxy Digital.



The bank is also offering clients access to a fund, also run by Galaxy Digital, that deals with the cryptocurrency Ether,<a href="https://www.coindesk.com/markets/2022/03/21/goldman-sachs-conducts-first-over-the-counter-crypto-trade-with-galaxy/" target="_blank" rel="noreferrer noopener"> according to CoinDesk</a>.



For Goldman, the most recent over-the-counter trade is the beginning of its embrace of crypto, according to a press release issued by Galaxy Digital.&nbsp;



&#8220;We are pleased to have executed our first cash-settled crypto currency options trade with Galaxy,&#8221; said Max Minton, Asia Pacific head of digital assets for Goldman Sachs in a press release. &#8220;This is an important development in our digital assets capabilities and for the broader evolution of the asset class.&#8221;</div>

The trademarks further evidence of Wall Street's acceptance of crypto.

Goldman makes first over-the-counter crypto trade in a first for major U.S. banks

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