Crypto

Goldman sees boomerang clients in ‘flight to quality’ as crisis engulfs crypto firms


Goldman Sachs’ head of crypto trading says investors are “returning” to the bank to transact crypto after being scared off by crises at digital asset firms such as FTX.

Andrei Kazantsev said Financial News that traditional clients of hedge funds and asset managers had previously flirted with crypto firms, but are now reverting to institutions such as Goldman due to “counterparty risk” in the digital asset space. He said the process was a “flight to quality”.

Kazantsev’s comments to FN On Nov. 9, at the London Crypto Conference, Token 2049 came hours before crypto giant Binance pulled out of a proposed deal to save rival FTX, following a liquidity crunch at this last.

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FTX was the subject of what was effectively a bank run, as customers rushed to withdraw funds from the trading platform following reports that it was facing challenges. loss issues at Alameda, a related trading company.

As the Sam Bankman-Fried-owned company suffered massive withdrawals, Binance announced that it would buy the company, pending due diligence. But Binance, the world’s largest crypto exchange, said on Nov. 9 that it was pulling out of the deal.

Events have rocked an industry already in the throes of trauma this year. Companies such as crypto lender Celsius and broker Voyager Digital have filed for bankruptcy in recent months after prices plummeted in the second quarter of 2022.

“At first, our hope was to be able to help FTX customers provide liquidity, but the issues are beyond our control or our ability to help,” Binance said in a statement.

The sector has lost another $180 billion in market capitalization in recent days, according to data from CoinMarketCap. Crypto hedge funds too took a hit from the latest market fall on FTX news, FN reported on November 9.

During a panel discussion earlier today, Kazantsev told the conference that counterparty risk is “starting to be a priority” for traditional hedge funds and asset managers. “They want to see names they are already comfortable with to be the counterpart in the crypto space.”

However, this has not scared traditional financial firms away from the sector as a whole, he added.

“There is a growing understanding that this is a space where they need to be active, where they need to participate on behalf of their clients. They are ready to use institutions such as ours to meet their demands,” Kazantsev said.

Goldman Sachs is one of the few major investment banks to offer crypto derivatives trading services, and it does not yet offer spot trading in assets such as bitcoin or ether. It has a team of around 50 people in its crypto trading team, along with around 20 engineers.

Nomura is looking to take a similar position in digital assets and is building a 50-person team for its crypto spin-out Laser Digital. The firm is aiming to start trading digital assets early next year because it makes a major breakthrough in the sector.

Elsewhere at the Token 2049 conference, industry executives spoke about how the sector has matured following its tumultuous year. Visitors to the event were greeted by two live alpacas in the entrance hall, while sports cars – a yellow Lamborghini, a Bentley and a Rolls-Royce – sat outside, branded as the SuperEx crypto exchange.

To contact the author of this story with comments or news, email Alex Daniel

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