This Bitcoin-Goldman Sachs-Coinbase deal will improve Institutional Adoption; Why?

Saif Naqvi
Wall Street
Source: Pixabay

Institutional adoption of Bitcoin continues to grow despite price fluctuations and major Wall Street firms are constantly looking for more ways to interact with crypto. After launching options trading in March, Goldman Sachs stepped deeper into the world of crypto after deciding to give its first bitcoin-backed loan to Coinbase.

According to Bloomberg, a renowned investment bank, Goldman Sachs issued its first-ever Bitcoin-backed loan to popular crypto exchange Coinbase for an undisclosed amount.

Following news of the deal, Coinbase Institutional Brett Tejpaul told Bloomberg “Coinbase’s work with Goldman is a first step in the recognition of crypto as collateral which deepens the bridge between the fiat and crypto economies.”

Earlier, Goldman Sachs became the first major U.S. bank to trade over-the-counter (OTC) Bitcoin options. The firm has also shown interest in the metaverse and NFTs, calling the metaverse an $8 Trillion opportunity.

Wall Street & Crypto

During the early years, It’s no secret that Wall Street had maintained a skeptical view of cryptocurrencies. Not only did crypto present radical changes to the current economical structure, but it also offered an alternative mode of investment – something which could potentially pull money away from traditional markets.

However, as institutional adoption grew from smaller players amid a clearer regulatory landscape, prominent banks eventually jumped on the bandwagon. The likes of Standard Chartered, Citi Bank, and Morgan Stanley have derived avenues to bring cryptocurrency investments to their customers.

Wells Fargo & Co began offering Bitcoin to its wealthy clients’ cryptocurrency exposure in the last year while State Street Corp said it intends to offer cryptocurrency custody services back in March.

Bitcoin backed loans gaining traction

While Bitcoin’s price volatility remains a major concern and a like-for-like cash loan against Bitcoin could end up losing value if the market falls, recent developments show that confidence in its long-term success remains high.

In March, San-Diego based bank Silvergate Capital partnered with Fidelity Digital Assets to expand its loan offerings. Under the deal, Silvergate would use its proprietary payments network to fund loans while Fidelity Digital Assets would hold the investor’s Bitcoin as collateral.

Last month, MicroStrategy put up its Bitcoin against a $205 million three-year term loan from a unit of Silvergate Bank. “We view Bitcoin as pristine collateral for the digital age and believe this transaction allows us to continue pursuing our Bitcoin acquisition strategy in a manner accretive to our shareholders,” said CEO Michael Saylor after the deal.