The crypto market has not been at its best since the year.
Volatility has never been so high. After months of falling coin prices starting with bitcoin, the king of crypto, a slight rebound followed.
But since then the prices of digital currencies have been zigzagging, unable to exceed certain symbolic thresholds. Bitcoin, for example, is struggling to rise above $50,000 despite news that shows wider acceptance.
More and more major critical crypto investors, for example, have made their mea culpa. In turn, we saw billionaires and big names in traditional finance such as Ken Griffin, Ray Dalio, Bill Gross recognize that bitcoin had found its place as an asset in which we could invest.
And on the regulatory front, President Joe Biden signed an executive order that urges federal agencies not to stifle innovation. A way to call for less draconian regulation vis-à-vis the crypto sphere. A sign that the wind is blowing in its direction, crypto evangelists like Sam Bankman-Fried, CEO of crypto exchange FTX.com, would like to see the Biden administration issue regulation of the sector as soon as possible.
Admittedly, it still remains to convince the Securities and Exchange Commission to approve a spot bitcoin exchange-traded fund EFT. Basically, the agency remains opposed to spot ETFs based on actual bitcoin holdings. But overall the industry has never been in such an ideal situation vis-à-vis the general public as well as regulators and traditional finance.
It is therefore no surprise that the prestigious investment bank Goldman Sachs has just taken a new step in the crypto-related services it offers. The establishment has just made the very first lending facility backed by bitcoin.
Basically, Goldman Sachs allowed, through this transaction, the borrowing client to use bitcoin (BTC) as collateral to obtain a cash loan.
"We recently extended a secured lending facility where we lent fiat collateralised on BTC; BTC being owned by the borrower," a Goldman Sachs spokesperson told TheStreet in an emailed statement. "The Interesting piece for us was the structure and the 24-7-365 day risk management."
Goldman Sachs didn't provide additional details but the legacy bank thus adds a service previously offered only by crypto firms. Bloomberg was the first to report about the lending facility.
The transaction shows how mainstream finance is embracing bitcoin and crypto generally. Most Wall Street institutions are increasingly offering crypto-related services. This is the case of Jefferies Financial and Cowen Inc. which now has a unit specializing in digital assets.
This is not the first time that Goldman Sachs has dared a first related to crypto and more particularly to bitcoin.
In March. the bank said that it has just carried out its first over-the-counter (OTC) crypto options trade. The firm traded a bitcoin-linked instrument called a non-deliverable bitcoin option (NDO), which is a derivative tied to bitcoin’s price that pays out in cash, Goldman Sachs said.
Options are used by crypto investors to hedge risks or boost yields, and over-the-counter transactions are larger trades negotiated privately.
The transaction carried out by Goldman Sachs was facilitated by Galaxy Digital, a company that invests in crypto and especially in bitcoin.
"This marks the first OTC crypto transaction by a major bank in the U.S., as Goldman Sachs continues expanding its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions," Galaxy said at the time.
Galaxy, a global provider of blockchain and cryptocurrency financial services for institutions, was founded and is run by billionaire Mike Novogratz, a bitcoin evangelist. Novogratz is also a former Goldman Sachs banker.
These transactions suggest that Goldman Sachs believes cryptocurrencies are stable enough to be vouched for by large financial institutions.