Bitcoin Spot ETF: Goldman Sachs Wants In, Cash Settlement Mode Benefits More Traditional Finance Participation

According to a report by CoinDesk, Wall Street investment bank Goldman Sachs may also have a role to play in the upcoming Bitcoin spot ETFs from BlackRock and Grayscale. Industry insiders anticipate that each Bitcoin spot ETF will eventually involve 5 to 10 authorized participants (APs), and the cash-settled nature will be conducive to more traditional financial institutions joining in.

Goldman Sachs Also Wants to Be an Authorized Participant for Bitcoin Spot ETFs

Sources revealed that Goldman Sachs is in negotiations to become an Authorized Participant (AP) for Bitcoin spot ETFs. This is one of the most crucial roles in the multi-trillion-dollar ETF industry, involving the creation and redemption of ETF shares to maintain the consistency between Net Asset Value (NAV) and ETF market value.

APs require qualification processes. Once becoming an AP, as long as there is cash on hand and market spreads exist, one can legitimately engage in arbitrage in the primary market of ETFs, making it a risk-free job.

Currently, the list of APs includes BlackRock, Fidelity, WisdomTree, Invesco, and Valkyrie, while Jane Street, JPMorgan, Virtue, and Cantor have each listed their AP names.

Cash Mode of Bitcoin Spot ETFs Encourages Traditional Financial Institutions to Participate

According to CoinDesk, industry insiders expect each Bitcoin spot ETF to eventually have 5 to 10 APs participating.

Traditionally, large U.S. financial institutions that have avoided direct exposure to cryptocurrencies are invited to join the highly anticipated Bitcoin ETF party because of the cash-based mechanism used to handle Bitcoin spot ETFs, which is considered an essential component of Bitcoin ETFs. Active participation of APs is crucial to maintaining the stability between ETF and spot prices. Grayscale's GBTC, on the other hand, has seen such extreme premiums and discounts due to the lack of this role.

Illustration of ETF | What is the difference between the SEC-preferred ETF cash mode and the BlackRock Bitcoin Physical ETF?

The companies that Goldman Sachs seeks to cooperate with are also major participants. BlackRock is one of the world's largest asset management companies, while Grayscale operates the $26 billion Grayscale Bitcoin Trust (GBTC), currently the largest Bitcoin investment tool.

It is foreseeable that more and more traditional financial institutions will join this lineup.