Goldman Sachs Bitcoin-backed loan is now live
Goldman Sachs has announced that it has launched its first Bitcoin-backed loan. This is a move that demonstrates Wall Street, and the tradfi world more broadly, further embracing crypto.
The prestigious investment bank lent fiat currency cash in exchange for the borrower pledging its BTC holding as collateral. Given Bitcoin’s proclivity for wild price swings, BTC-backed loans are undoubtedly a risky product offering for the conservative financial institutions. In the event that the Bitcoin price were to drop, the borrower would likely need to pledge more BTC or risk losing its collateral.
A spokesperson for Goldman Sachs has been reported as commenting that the transaction was particularly interesting because of its structure and 24-hour risk management requirement. BTC trades 24/7, whereas fiat currencies do not trade over weekends and liquidity is highly dependent on the time of day in different trading zones.