Early Investing

Goldman Sachs Signals Crypto Is Here for the Long Haul

Goldman Sachs Signals Crypto Is Here for the Long Haul

Goldman Sachs has made its first crypto trade. No, this isn’t an April Fool’s joke. The trade actually happened last week. 

It was a bitcoin derivatives trade with Galaxy Digital. And Goldman is interested in participating in a full-fledged options market for crypto. 

This is a significant moment for crypto in the United States. Goldman Sachs isn’t the biggest asset management firm in the world. With $2.4 trillion in assets under management (AUM), it’s just the 10th biggest asset management firm in the world. Fidelity – which was the first big asset manager to fully embrace crypto – has $4.2 trillion in AUM. And the world’s largest asset manager, BlackRock, has $9.5 trillion in AUM. That’s more than Goldman and Fidelity combined!

But Goldman punches above its weight class. There’s a bipartisan revolving door between the White House and Goldman that never stops spinning. Former Treasury Secretaries Steve Mnuchin (Trump), Henry Paulson (George W. Bush) and Robert Rubin (Clinton) were all Goldman alums. So is current SEC Chairman Gary Gensler. And those are just some of the big names. Countless other former Goldman employees have worked as White House staffers, served as Congressional staffers (or in Congress) or have become lobbyists.

Goldman’s reach into the policymaking apparatus is extensive. The views and beliefs of Goldman Sachs tend to be reflected by the government. And that’s why this trade matters. If Goldman is embracing crypto, the U.S. government will have to take crypto more seriously.

Fidelity’s entrance into the crypto markets in 2018 was a game changer. The world’s fourth-largest asset manager was fully embracing crypto. It wanted to take custody and trade digital assets like bitcoin. It changed the market. And Fidelity’s success with bitcoin and in crypto made it possible for other institutions to dip their toes in the crypto waters.

Goldman’s move into crypto isn’t a game changer. But i’s an incredibly positive signal to American investors and other big asset management firms that crypto has to be part of any investor’s portfolio. Not investing in crypto isn’t an option anymore. And when Goldman speaks, everyone listens.

It’s also not the first time Goldman has sent positive signals about crypto. Back in 2015, Goldman invested in Circle (the creators of the USDC stablecoin). It was a small investment — less than $50 million. But right now, Goldman’s investment in Circle looks prescient. Circle is currently trying to go public via a SPAC (special purpose acquisition company) at a $9 billion valuation.

Meanwhile, BlackRock’s flirtation with crypto has been a sideshow. In his annual letter to shareholders, BlackRock CEO Larry Fink wrote that BlackRock “is studying digital currencies” to see how they can help clients. Of course, the promise to study crypto comes one year after BlackRock began trading in the bitcoin futures market and five years after Fink called bitcoin an “index of money laundering.”

Goldman deserves credit for taking crypto so seriously right from the beginning. Goldman didn’t move as fast as Fidelity. But that’s okay. This week’s bitcoin derivative trade shows crypto is here for the long haul. And that’s a signal all investors should pay attention to.

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