Wall Street Whale Goldman Sachs Explores Key Role as Authorized Participant, Pioneering the Future of Cryptocurrency Investments

Goldman Sachs Rides Crypto Wave

“Wall Street Whale Goldman Sachs Explores Key Role as Authorized Participant, Pioneering the Future of Cryptocurrency Investments”

Wall Street Whale Goldman Sachs Explores Key Role as Authorized Participant, Pioneering the Future of Cryptocurrency Investments

GOLDMAN SACHS

 

Goldman Sachs is currently in negotiations to assume the pivotal role of an “authorized participant” (AP) for forthcoming Bitcoin exchange-traded funds (ETFs) from BlackRock and Grayscale in the U.S., pending SEC approval. As an AP, the influential Wall Street institution would be responsible for creating and redeeming ETF shares, a critical function in the $7 trillion ETF industry, ensuring their alignment with the underlying Bitcoin value.

This pursuit aligns Goldman Sachs with other distinguished financial entities, including JPMorgan Chase, Jane Street, and Cantor Fitzgerald, all designated as APs for various Bitcoin ETF applicants². Industry insiders suggest that each Bitcoin ETF may involve five to ten APs, reflecting a significant shift for major U.S. banks traditionally hesitant to engage directly with cryptocurrencies.

Motivating this change is the adoption of a cash-based mechanism for managing the Bitcoin supporting ETF shares, considered instrumental in securing SEC approval. Goldman Sachs seeks partnerships with key players such as BlackRock, the world’s largest asset manager, and Grayscale, overseeing the substantial $26 billion Grayscale Bitcoin Trust. Notably, Grayscale aims to convert its trust into a more fluid and tradable ETF, designating Jane Street and Virtu Financial as potential APs for this transition.

The potential approval of Bitcoin ETFs, particularly those holding spot Bitcoin directly, carries significant implications for the crypto market. Benefits include bridging the gap between traditional finance and the crypto market, increasing accessibility to mainstream investors, and enhancing market stability and Bitcoin’s maturity.  However, risks include potential shortages of “regulated” Bitcoin, impacting the profitability of the “basis trade”, and exposing investors to volatility, security concerns, and regulatory uncertainties associated with Bitcoin ownership.

Some of my research sources:

  1. – MSN Money: Goldman Sachs reportedly wants in on the bitcoin ETF hype
  2. – Business Insider: Bitcoin ETF, Goldman Sachs and BlackRock – What’s Going On?
  3. – The Street: Goldman Sachs Seeks to Enter Bitcoin Market With BlackRock ETF Role
  4. – Forbes: Best Bitcoin ETFs Of January 2024
  5. – Forbes: The Bitcoin Spot ETF: Benefits And Pitfalls Of Crypto-Based ETFs
  6. – Cointelegraph: 2 risks around Bitcoin ETF launch that no one’s talking about

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