According to a recent report from Goldman Sachs, 2023 saw significant institutional support for the crypto industry, especially for derivatives trading.
For as long as the crypto industry has existed, it has pursued institutional support. Considering the fact that the crypto industry operated on the fringes of the mainstream financial world for so many years, institutional support would mean both more financial benefits and public validation. Well, according to Goldman Sachs, 2023 saw significant progress in institutionalizing the crypto industry.
Goldman Sachs: How Crypto Went Institutional
Goldman Sachs notes that 2023 especially saw the development of regulated derivatives and platforms that offer them for sale. Some of the notable ones include Coinbase Derivatives, CBOE, and Eurex, as per the report.
It also says that Bitcoin and Ether options trading was not very remarkable for the first 9 months of the year. Ether, on the other hand, was known to trail behind Bitcoin, being worth between 20%-50% of Bitcoin’s future trading. The future trading markets for the two biggest cryptos were not doing poorly but also weren’t overwhelming successes.
But by Q4, Goldman Sachs observed that “a consistent increase in bitcoin (BTC) and ether (ETH) futures and options trading, and in Q4 has become the top BTC futures exchange by open interest.”
The result of this was that the open interest for Bitcoin alone topped $4 billion in Q4. This sudden spike in institutional interest in future and options trading has to do with the potential Bitcoin spot ETF approval. For years, companies in the crypto space have tried to get approval for an ETF from the SEC in America but have been denied.
But now, the industry is betting on BlackRock’s ETF application being approved. If it is, it will mean more investment opportunities for those interested in cryptos. It has also been speculated that BlackRock will follow up the Bitcoin ETF with one for Ether as well.
With all this speculation flying about, many institutional investors took more interest in derivatives trading. This would position them to take advantage of the ETF approval if it comes through. We won’t know for sure till 2024 if the ETF will be approved but the effects are already being felt. It also shows just how important a Bitcoin ETF is to the industry and how much growth it could trigger if it comes through.
In 2024, we can expect to see an even bigger futures market from the jump, partially because of the sustained anticipation for the various ETFs. And unlike in 2023, the markets will be thriving from the beginning as opposed to seeing a sudden influx of investment later in the year.
But from all we have seen, the crypto industry is getting an unprecedented level of institutional support and this will go a long way to secure its longevity.
