Goldman Sachs Hedge Fund Clients to Pour $2.8T into Bitcoin

• Goldman Sachs’ large investors rekindle interest in crypto as they reportedly become active following the spot Bitcoin ETF approval. 

• It is reported that last year saw little activity from such clients as 2023 became a byproduct of the 2022 FTX failure. 

In the wake of the recent approval of the spot Bitcoin Exchange-Traded Fund (ETF), Goldman Sachs’ clients rekindled their interest in crypto as they started moving back into the market. As reported by Max Minton, head of digital assets for Goldman Asia Pacific, many of the large clients that earlier went into dormancy are now showing signs of renewed activities with others “exploring getting active”.

According to Minton, this resurgence was triggered by the ten-spot Bitcoin ETF approvals. Interestingly, Goldman Sachs spoke about this impact in an earlier post published by Crypto News Flash. 

The recent ETF (exchange-traded funds) approval has triggered a resurgence of interest and activities from our clients. Many of our largest clients are active or exploring getting active in space.

McDermott of Goldman Sachs Provides Context to the Situation

In February 2023, Mathew McDermott, Goldman Sachs’ global head of digital assets disclosed the indecision of large investors to get back into the market. Speaking in an interview, McDermott stated that the lack of better regulated and capital entities poses severe challenges to crypto adoption.

In addition, the market pullbacks experienced in 2022 following the FTX exchange collapse, forcing most assets to trade about 90% from their all-time highs pushed large investors out. Fascinatingly, the bank has consistently defended the industry over the years with one of its reports clarifying that crypto does not pose any major risk to the global economy as reported by Crypto News Flash. 

Currently, the market seems to be doing well as Bitcoin trades at $67,018 following a 4% surge in the last 24 hours. From year-to-date, Bitcoin has appreciated by 51.77%.

What we’ve seen is more of our larger clients eager to onboard and trade with what they probably perceive to be much better-regulated and capitalized entities.

Existing Clients Renew Interest in Crypto

Goldman’s crypto trading desk launched in 2021 has seen tremendous growth providing cash-settled Bitcoin option and Ether option trading coupled with the CME-listed Bitcoin and Ether futures. Unexpectedly, last year remained quiet almost throughout as the crypto market slowly completed its recovery phase. This year, the broad market has shown signs of impressive runs with Bitcoin setting a new all-time-high price pending the much anticipated halving event.

As confirmed by Minton, the majority of the current interest comes from existing clients, mainly the traditional hedge funds. Speaking further on this, he disclosed that the bank is tirelessly working to expand into a wider universe of clients such as Asset Managers, bank clients, and some selected digital asset firms. 

Over the years, crypto derivatives offered have been largely patronized as clients utilize them for “directional bets, yield enhancement, and hedging purposes.”

Goldman Sachs is reported to have $2.8 trillion in assets under management in 2023. This is expected to grow drastically this year due to the increasing number of demand. Regardless of altcoins becoming the new focus for some clients, Bitcoin remains the primary target. Interestingly, the degree of focus on Ethereum might change depending on the Ether ETF decision made by the US Securities and Exchange Commission (SEC). 

Goldman’s overall role in the industry transcends crypto trading, as it also deals with traditional asset tokenization using blockchain. According to McDermott, the bank’s key focus on crypto is geared towards “tokenization, remaking the plumbing of the financial market, and the impact of digital money on markets.”

The excitement from our side is … seeing how this technology can impact many different parts of the financial system and have a real commercial impact. We’re at such an early stage in terms of its adoption, but as you look across the marketplace and you see the breadth of financial institutions building out their digital asset teams, their digital asset strategies, be that the sell side or the buy side, it’s just super exciting and I think there’s a real recognition there.

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