Institutional Investors Flock Back to Crypto

Goldman Sachs’ hedge fund clients are piling back into crypto this year, with appetite renewed by the approval of spot Bitcoin exchange-traded funds. According to Max Minton, head of digital assets for Goldman Asia Pacific, many of the firm’s largest clients have recently become active or are “exploring getting active” in the crypto sector.

Goldman Sachs’ clients are showing renewed interest in Bitcoin, Ether, and other crypto assets.

The increased appetite for cryptocurrency stems from the approval of ten new Bitcoin ETFs in the United States in January, which rubber-stamped the crypto assets as being a more integral part of traditional markets. “The recent ETF approval has triggered a resurgence of interest and activities from our clients,” Minton explained.

The approval of Bitcoin ETFs has triggered a resurgence of interest in crypto.

Minton added that the bulk of the fresh demand comes primarily from Goldman’s existing clients by way of its options and futures offerings, with hedge funds being the most involved of its clients. Goldman Sachs reported a record $2.8 trillion in assets under management at the end of 2023.

Hedge funds are leading the charge in Goldman Sachs’ crypto offerings.

Notably, Goldman currently does not offer any spot crypto products to its clients, despite having launched its first crypto trading desk in 2021. The desk only provides exposure to crypto derivatives, including Bitcoin and Ether options and futures.

Goldman Sachs’ crypto trading desk provides exposure to crypto derivatives.

Minton said that Goldman’s clients were primarily using their derivatives to gain exposure to the volatility of crypto as well as making weighted predictions on where prices were headed in the mid-term. Bitcoin-related products stood as the most popular investment vehicles among active clients, added Minton.

Goldman Sachs’ clients are using derivatives to gain exposure to Bitcoin’s volatility.

Minton also looked to the potential approval of a spot Ether ETF in the U.S. as potentially shifting his firm’s institutional clients toward Ether. However, Bloomberg ETF analysts have pegged the chances of an Ether ETF approval by May at just 35%, with the Securities and Exchange Commission’s prolonged “radio silence” to would-be fund issuers being seen as increasingly bearish.

The potential approval of a spot Ether ETF could shift Goldman Sachs’ clients toward Ether.