The Wall Street giant, Goldman Sachs, has announced the development of their Bitcoin(BTC) derivatives a few months back and since no further disclosure was done, their silence made the market inquisitive about the instrument. In the most recent development, The Block reports that Goldman Sachs is finally ready to launch their Bitcoin derivatives.
According to the report, the investment firm has been bringing a few select clients onboard to its “Bitcoin non-deliverable forward contracts.” Don’t get puzzled by the jargon in the name, the derivative is simply a financial security, whose value will be derived from an underlying asset.
Derivatives are a type of futures contract between two parties to sell an asset once it reaches an agreed price. Unlike a futures contract though, derivatives are not traded on an exchange. To illustrate, A and B are trading, A owns 1 BTC valued at $6,500 and B contractually agree via a futures contract to buy this Bitcoin for $6,500 after 5 months. The value of holding is secured for A and B will buy it at the contractual price indifferent to the fluctuation in the price point. B will earn a profit if the BTC price increases and bear a loss if it dips further lower.
It is surprising that an institutional investor like Goldman Sachs is being tight-lipped about the launch and had done so quite secretively. It is assumed they still need time to mull over the integrities of the instrument and the current offering is just a trial phase to configure proper regulations around the derivative.