Despite the 80% collapse in crypto prices this year, Goldman Sachs says its cryptocurrency trading is significantly higher in native volumes, which translates to being flat in dollar terms.
That’s according to Andrei Kazantsev, who heads Goldman Sachs crypto trading globally. The bank provides market making in cash settled derivatives in the form of non deliverable forwards and options.
The cryptocurrency sector has been talking about its institutional adoption for years. But for a period hedge funds dominated.
“It used to be only hedge funds were interested in crypto. It’s definitely not anymore,” said Kazantsev talking at the Crypto Assets conference, pointing to interest from asset managers and pension funds.
He also addressed the sector’s risks.
“Everyone is saying it’s a high volatility asset. How can it be investable for big asset managers? In reality, a lot of asset managers are already involved in very high volatility currencies. In FX we’ve seen many episodes of local volatility, for instance, in Turkey, in Russia, in Brazil, in many EM (emerging market) countries. So this is not something new,” said Kazantsev.
“So long as you put robust risk management frameworks around that, it’s manageable. And it’s another asset class that potentially can provide high yield.”
The recent bankruptcies in the crypto sector have highlighted counterparty risks, which is one of the reasons that traditional clients would prefer to trade with a counterparty such as Goldman.
“The number of inbound client calls we’re having is constantly increasing across the board, across different client bases,” added Kazantsev.
Beyond crypto trading, Goldman is involved in numerous blockchain initiatives. Working with Digital Asset, it’s developing its tokenization platform to support multiple asset classes. It has been participating in JP Morgan’s intraday Repo platform for more than a year. And in HQLAX, the collateral management platform.
Aside from these activities, it has made several investments. These include Digital Asset, crypto trading platform Elwood, crypto security company Certik, infrastructure firm Blockdaemon, and crypto data firm Coin Metrics.
