Introduction
Goldman Sachs, the giant global investments bank, has found gold in bitcoin and may be on its way to packing a sack of it with its bitcoin-backed loans. Yes, Goldman Sachs is introducing its first-ever loan backed bitcoin, Bloomberg reported Thursday. The product is a cash loan with bitcoin, the biggest cryptocurrency in the market, as collateral by the borrower.
Goldman Sachs’ lending facility will lend cash collateralized by bitcoin owned by a borrower. According to Goldman Sachs, it founds the unique structure and 24-hour risk management of cryptocurrencies interesting and believes this will add value.
Goldman Sachs is not new to cryptocurrency. March last year, Goldman Sachs reintroduced its bitcoin-trading desk. By May, it had set up a team of crypto traders and its bitcoin derivatives business, which it expanded to include Ethereum futures and options in June of the same year. In the New Year of 2022, Goldman Sachs said bitcoin could hit $100,000, pointing out that bitcoin’s potential is beyond store of value. Also, Goldman Sachs believes that the virtual asset space is much bigger than bitcoin. In March 2022, Goldman Sachs completed its first OTC crypto transaction, a market most institutions hardly play in.
Will this be the beginning of adoption of crypto-backed loans by traditional finance (TradFi)? Before Goldman Sachs’ move to introduce a crypto-backed loan, Silvergate Bank had given Microstrategy a bitcoin-backed loan of $205 million to buy more bitcoins. Last year, we reported that Goldman Sachs is one of the 10 top banks investing in crypto and blockchain companies. By July 2021, Goldman Sachs had 8 assets under its management worth $1 billion. The size of funding rounds as a proxy of investments was $204 million. The companies invested in include Axoni, Blockdaemon, Circle, Coin Metrics, HQLAx, R3, and Veem.
