Goldman Sachs Sees Crypto Options Markets as ‘Next Big Step’ for Institutional Adoption

While CME Group’s bitcoin futures contracts initially lured in Wall Street firms, Goldman’s head of crypto trading says options are “more versatile.”

AccessTimeIconDec 2, 2021 at 7:01 p.m. UTC
Updated May 11, 2023 at 5:32 p.m. UTC

Goldman Sachs, the Wall Street heavyweight, says the next major development for cryptocurrencies will be more liquid options markets as more traditional financial firms pile into the rapidly growing asset class.

“We are seeing a lot of demand for more derivative-type hedging,” Andrei Kazantsev, Goldman’s global head of crypto trading, said Thursday during a CoinDesk-hosted panel discussion. “The next big step that we are envisioning is the development of options markets.”

Kazantsev described cryptocurrency derivatives as being in the “infancy of product scope” when compared with more traditional markets such as equities or foreign exchange.

The bitcoin options market has already been seeing fast growth over the past couple years.

Open interest in bitcoin options, or the total value of outstanding contracts, stood at about $12 billion as of the latest data from Skew, a subsidiary of Coinbase that tracks data on cryptocurrency derivatives markets. As recently as the first half of 2020, the market rarely exceeded $2 billion.

Chart showing the total size of open contracts in the bitcoin options market shows how quickly the market has grow in just two years. (Skew)
Chart showing the total size of open contracts in the bitcoin options market shows how quickly the market has grow in just two years. (Skew)

Investors use cryptocurrency options to hedge out existing risk or take on additional market exposure. Options are a type of financial instrument called a “derivative,” which obtains its value from the price of another asset – in this case, the underlying cryptocurrency.

“There might be equity funds that have an exposure to a stock that has underlying bitcoin holdings,” explained Kazantsev. “In order to hedge that exposure, they might trade futures against that. For them, rather than rebalancing the portfolio dynamically, what they really want to do is hedge for the longer term, and to know the downside on the hedge that they can have. That’s where options become really important.”

“There are more versatile possibilities to hedge specific exposures with options than with futures alone,” added Kazantsev.

Earlier this year, Goldman Sachs re-established a cryptocurrency trading desk amid increased interest from its roster of clients, which include hedge funds, endowments and other institutional money managers.

The trading desk was set up to provide principal liquidity for CME Group’s crypto-related futures and over-the-counter equivalents. Principal liquidity implies Goldman Sachs takes the other side of the buy or sell trade, resulting in a new risk position in the bank’s internal holdings.

Kazantsev says the process allows Goldman Sachs to execute trades with larger notional values.

“We’re active in providing liquidity and taking risk on behalf of our clients and in the market,” said Kazantsev.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Tracy Wang

Tracy was the deputy managing editor at CoinDesk. She owns BTC, ETH, MINA, ENS and some NFTs.