First Mover Americas: Goldman's Crypto OTC Trade Revives Hopes of Institutional Demand, Lido Token Rallies

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By Omkar Godbole

Cryptocurrencies gained ground early Tuesday as recession fears and expectations of a Federal Reserve (Fed) rate cut in 2023, coupled with renewed hopes of stronger institutional participation, overshadowed Fed Chairman Jerome Powell's hawkish comments.

Bitcoin topped $43,000, hitting its highest level since March 3, while ether, the native token powering Ethereum's blockchain, rose over 4% to $3,050. The total crypto market capitalization increased by 3.7% to $1.9 trillion, according to data provided by the charting platform TradingView.

On Monday, New York-based digital-asset financial company Galaxy Digital announced a successful execution of its first over-the-counter (OTC) crypto transaction with Goldman Sachs in the form of a bitcoin non-deliverable option or NDO.

"This marks the first OTC crypto transaction by a major bank in the U.S. as Goldman Sachs continues expanding its cryptocurrency offerings, demonstrating the continued maturation and adoption of digital assets by banking institutions," Galaxy said.

Galaxy's announcement is pivotal as products like non-deliverable options and non-deliverable forwards provide a window to traditional investors looking to gain exposure to crypto markets without holding the actual cryptocurrency. Thus, their availability could bring more mainstream investors to crypto markets.

"NDFs and other OTC derivatives could be an important step to unlock demand from traditional investors looking to gain exposure in the space but have operationally challenged," Ilan Solot, a partner at the Tagus Capital Multi-Strategy Fund, said in an email.

A non-deliverable option is a derivative contract cash-settled for the difference at its maturity rather than on the date of the actual delivery of the underlying asset. Similarly, a non-deliverable forward is a setup where parties agree to take opposite sides of a transaction settled for cash on the expiration date.

These instruments are quite popular in the foreign exchange markets, especially for clients operating in countries with a non-convertible or partially convertible currency like the Indian rupee. In such cases, foreign investors struggle to make a physical cash settlement.

Last year, B2C2, a crypto liquidity provider and over-the-counter trader, conducted its first transaction of a crypto non-deliverable forward with trading firm QCP Capital.

By Omkar Godbole

LDO, the native token of liquid staking giant Lido, was leading the broader market higher with a 16% gain on a 24-hour basis, according to data source Messari.

The token picked up a bid near $1.47 in the second half of February, even though the broader crypto market suffered losses on Russia's invasion of Ukraine and recently rose hit highs near $4. That's a 172% gain in less than four weeks.

According to observers, the token has benefitted from the rising popularity of liquid staking and the staking derivative token's adoption by decentralized finance (DeFi) protocols.

"It is likely due to increasing awareness of imminent Ethereum merge and the inclusion of Lido staked ETH in DeFi giant Aave as collateral," CK Cheung, an investment analyst at DeFiance Capital, told CoinDesk in a Telegram chat.

"Lido is the dominant player in ether liquid staking, which is set to benefit from the Ethereum merge with higher staking yields. Having staked ETH included in Aave helps with capital efficiency," Cheung added.

Lido is one of the largest entities staking ether, with over 2.5 million ether deposited into the liquid staking protocol.

Liquid staking protocols allow holders of tokens to stake their assets without losing liquidity. Stakers receive a derivative token or liquid representation of the staked asset that can be used to earn extra yield elsewhere.

Read: Lido Dominates Booming Market for Ethereum 2.0 Staking Derivatives

DASH breakout

DASH has topped the Ichimoku Cloud, confirming a bullish reversal. The cryptocurrency has also found acceptance above the horizontal resistance line at $120.

Previously called darkcoin, DASH is a cryptocurrency designed specifically for payments.