Golden Sachs, the major investment bank, is increasingly diversifying its activities in the cryptosphere. Two major announcements have been made concerning this versatility in its business. The first was on Monday 10 May, when the bank announced its major investment in Coin Metrics. And on 6 May, Goldman Sachs said it would soon be offering NDFs for its Bitcoin customers.
Goldman Sachs and its activities
Goldman Sachs was founded in 1869 and is located in the financial district of Manhattan in New York. The company was founded by Marcus Goldman and Samuel Sachs. The current CEO is David Solomon, who has held his position since October 2018. In addition Mathew McDermott is the head of the company’s digital assets division. He is therefore also the person who participated in this substantial investment for Coin Metrics but also who proposed NDFs on Bitcoin.
Goldman Sachs also reopened its crypto trading desk in March, enabling its many clients to trade futures contracts. In addition, the firm’s analysts have created a portfolio of stocks linked to digital companies. The world leader has clearly understood the importance of multiplying its shares in the world of crypto-currencies. We can imagine that Goldman Sachs is not going to stop there.
Goldman Sachs’ NDFs on Bitcoin
Goldman Sachs, GS or still known as Goldman and The Firm also offers non-deliverable fowards, or NDFs on Bitcoin. This was announced by Bloomberg on 6 May. This option has been available to the investment firm’s many clients for a month now. The company has now made this information official. NDFs are also known as futures, and are used to bet on the price of an asset at a pre-determined date. Unlike other types of asset, NDFs are not ‘delivered’, as the name suggests. This means that customers will receive a fiat currency in the same way as a cryptocurrency.
How NDFs work
The way it works is simple: if you bet that the value of Bitcoin will rise over the next few days and you are right, you will be paid the difference between the initial sum and the new value of the Bitcoin. NDFs are reputed to be rather complex. Goldman Sachs then uses these assets in its financial flows to cover the company’s possible losses.
This is how the leader in financial investment will compensate its clients for NDFs. Whether customers make a large or small profit, the company is obliged to pay them their profits, since these bets are made outside the Bitcoin market. For the time being, these NDFs only work with Bitcoin. We do not yet know whether the company aims to carry out these speculations for other cryptocurrencies. Especially as it could be very interesting for Goldman Sachs and its clients to discover and manipulate the many other crypto-currencies.
By buying and selling Bitcoin futures, Goldman Sachs is providing real security. More specifically, the bank takes an equivalent bearish bet when the client takes a bullish bet. Transactions are cleared on the CME market by Cumberland DRW. The CME Group is an American financial company born of the Chicago Mercantile Exchange. It is one of the world’s leading futures exchanges. Cumberland DRW was founded in 2014. It is one of the pioneers of cryptocurrencies. It is therefore undoubtedly the best ally for Goldman Sachs to undertake this crypto project.
Coin Metrics and the financial giant
On Monday 10 May, Coin Metrics just completed its second and final round of funding, raising $15 million. For this investment, the major investment bank Golden Sachs was not alone. It is backed by a host of companies, including BlockFi, Morningside Group, Warburg Serres Investments and Acrew Ventures.
The major bank financing company has therefore invested in crypto data giant Coin Metrics. What’s more, Golden Sachs’ investment comes on the heels of the company’s announcement to offer NDFs. The fundraising came just days after Coinbase bought Skew. This confirms the idea that the relationship between cryptocurrencies and the world of finance is indeed the future for many businesses.
Coin Metrics is a company founded in 2017 that provides market data to very prestigious institutions. It also offers services using network data. The major funding from Goldman Sachs will undoubtedly enable it to expand internationally.
The first financing round
The company has completed a Series A financing round in 2019. A financing round is a company’s financial process and all the steps involved in this mechanism. It can also be a call for funds, an investor round and many other processes. The financing round amounted to $6 million.
Coin Metrcis has since built up an international group with a wide range of profiles. This group includes a great many cryptocurrency talents. But there are also former profiles from the traditional data and financial services industries. Even though the company already has a high profile and quality in its services and data, this funding could well accelerate its growth even further. However, we are witnessing a reversal of fortune here. Indeed, Goldman Sachs confessed in 2020 that cryptocurrencies were not a relevant asset class. What the major financial institutions still lack is US regulation that would facilitate the various projects in the cryptosphere. In particular, this could allow them to provide cryptocurrency directly as assets to their customers.
Commenting on the investment, CEO Mathew McDermott said, “The data is critical to the widespread approval of crypto assets by financial services institutions and traditional investors. Our clients will benefit greatly from Coin Metrics’ institutional-level data insights, so they can take advantage of emerging risk management mechanisms.”
