Goldman Sachs buys volatility, turning Bitcoin into a profitable business.

Goldman Sachs has agreed to acquire NEOS Investments for up to $2.25 billion. The firm manages 19 option-based income ETFs with a total size of $30 billion.

A trading strategy that has existed in traditional finance since the inception of options is the covered call option. Investors holding assets, not wanting to wait for uncertain future gains, prefer to receive cash immediately. They sell a right that allows someone else to buy the asset at a predetermined price in the future, receiving a premium in advance. If the asset price surges above the strike price, the asset is delivered at the agreed-upon limit; if the price remains stagnant, the premium received upfront belongs entirely to the option seller, who can then resell the option the following month. The return depends entirely on the market's expected volatility.

This explains why this strategy only yields meager returns on utility stocks, while Bitcoin can generate high returns.

Can we once again blame it on "large funds" doing everything they can to squeeze out the last remaining profits from the market? Let's take a look.

Volatility is a business

BTCI is one of NEOS's many options-based ETFs. The fund holds spot Bitcoin products and sells call options on its holdings. Currently, BTCI has $1.11 billion in assets under management and a management fee of 0.98%, which covers the fund manager's operating costs.

This was precisely the product Goldman Sachs originally intended to build in-house; it had submitted its application four months prior. However, in the end, instead of building it from scratch, it directly acquired an existing, mature target.

BTCI does not directly hold Bitcoin; instead, it purchases shares of Bitcoin spot ETFs such as BlackRock IBIT and Fidelity FBTC. It allocates funds across 11 different Bitcoin ETFs and then sells call options to cover this exposure. Buyers are willing to pay premiums for the options because they are bullish on Bitcoin. If Bitcoin rises, BTCI must sell shares up to the agreed-upon limit, foregoing any gains exceeding that limit; if Bitcoin's price remains flat, the shares remain with the fund. In either case, the fund pockets the upfront option premiums.

BTCI distributes its monthly earnings to fund holders. Due to Bitcoin's high volatility, it generates substantial premiums, currently paying out $7.75 per share per month, equivalent to an annualized yield of 27%.

Holding BTCI still means you'll suffer losses from price crashes and miss out on the peak of the bull market. It's not insurance against price drops. In exchange, you'll continue to receive the 27% return.

NEOS states that fund dividends are categorized as capital returns, which may include option premiums, dividends, capital gains, and interest. Capital returns can also deferred taxation and lower the cost basis of holding positions. Simply put, this return is not entirely net profit from trading; a portion of it comes from your principal.

BTCI's net asset value has fallen 25.4% year-to-date, with a drawdown of 40.9% over the past 12 months. The fund's trading logic is to forgo excess returns during bull markets in exchange for upfront cash flow, thereby weathering bear markets.

Goldman Sachs acquired NEOS for approximately $2.25 billion in a cash-and-stock deal. Prior to this, Goldman Sachs' options ETFs already had $40 billion in assets under management; after the acquisition, the assets under management will reach $80 billion, making it the eighth largest institution in this field globally.

Back in April, Goldman Sachs acquired Innovator Capital Management for $2 billion. Innovator manages buffered ETFs, products with a fixed one-year cycle that simultaneously limits both potential gains and potential losses within that cycle. Even if the market surges, you can't obtain returns exceeding the limit; however, on the other hand, the fund can help absorb a portion of your initial losses, typically 9% or 30%. Essentially, it trades the opportunity to profit from a significant market rally for protection against substantial losses. At the time of the acquisition, the fund managed over $31 billion. With this acquisition, the investment bank's assets under management generated from selling volatility reached $61 billion.

The total size of derivatives income ETFs is approximately $180 billion, with an annual growth rate of over 70% since 2021. In July alone, $7 billion flowed in, and the net inflow for the whole of 2026 is expected to reach $40 billion.

Beyond just options, Wall Street is actively packaging all crypto-native returns to separate cash flow from the price risks of the underlying assets.

On July 24, Fidelity submitted amended documentation allowing its $900 million Ethereum ETF (FETH) to stake 100% of its ETH. Validating nodes will be run by Blockdaemon, Figment, and Galaxy Digital, while the private keys will remain in Fidelity's custody. Of all rewards generated from staking, Fidelity, its partners, and the node operators will take a combined 15%, with the remaining 85% distributed quarterly to fund holders.

Grayscale became the first institution in the US to distribute staking rewards to investors in crypto spot funds, distributing $0.083178 per share in January 2026, totaling approximately $9.4 million. 21Shares opened staking for its Ethereum fund in October 2025, taking 25% of the total rewards and waiving the 0.21% management fee for one year. BlackRock established a separate product, iShares Staked Ethereum Trust, which was listed on Nasdaq.

Morgan Stanley's Ethereum and Solana Trust products were listed on the NYSE Arca board on July 28, with a management fee of 0.14%. Approximately 95% of the returns are distributed to investors in the form of monthly cash payments. MSSE will stake 50-80% of its ETH, setting an 80% staking cap; MSOL plans to stake all of its SOL.

In March 2026, JPMorgan Chase's Kinexys platform opened its services to institutions, allowing them to borrow US dollars using Bitcoin and Ethereum as collateral. Due to the high volatility of these assets, the collateral discount rate reached 30%-50%. This means that pledging $100,000 in crypto assets would only yield a maximum of $50,000-$70,000 in cash. (The collateral discount for US Treasury bonds is only 1%-5%).

JPMorgan Chase has also filed for a Bitcoin-linked structured note tied to BlackRock's IBIT, offering leverage up to 1.5x returns, but with a cap of approximately 16% if agreed-upon conditions are met before December 2026. Traditional giants secure guaranteed fees and structural protection; but when the market turns downward, who ultimately bears the losses?

Bitwise's client assets under management (AUM) were $15 billion in February, but this declined to $11 billion by April 1st, and by August, its more than 70 products totaled only $9 billion. Its flagship index fund, BITW, lost 31% of its net assets within seven months. Last week, the company announced layoffs, reducing its workforce from 180 in February to 155.

As asset prices fall, management fees charged based on asset size also shrink. Morgan Stanley, with 16,000 financial advisors managing $9.3 trillion in client funds, can directly push new funds into clients' portfolios.

Bitwise's response was swift, but its agility couldn't offset its structural weaknesses. Its earliest attempt to add staking functionality to its Ethereum fund failed in September 2025; Grayscale succeeded a month later. BlackRock didn't begin work on this until March, and Fidelity waited until July. Bitwise even acquired Chorus One in February, securing $2.2 billion in staked assets covering validator nodes on approximately 30 proof-of-stake networks; in April, it launched the Avalanche spot product with built-in staking functionality. Despite these efforts, it still faced downsizing and layoffs.

In early June 2026, the US Bitcoin spot ETF experienced its largest outflow since its listing. Better-than-expected employment data at the end of May postponed market expectations of interest rate cuts, and the 10-year US Treasury yield remained high, leading to a massive influx of investor funds into bonds. When traditional assets can provide substantial returns, the attractiveness of assets like Bitcoin, which do not generate returns, decreases. Bitcoin's profitability relies entirely on price increases.

The use of staking and covered call options to add returns to crypto assets is changing this landscape.

Financial advisors prioritize stable returns when allocating products for clients. On March 30, the U.S. Department of Labor proposed new rules establishing safe harbor provisions for trustees to allocate alternative assets (including crypto assets) in 401(k) retirement plans. These plans have historically avoided alternative assets due to legal liability risks. If the new rules are implemented, yield-generating crypto products may even enter retirement accounts earlier than simple crypto spot ETFs, as 401(k) product pools prioritize predictable cash income.

Sharmin Mossavar-Rahmani, chief investment officer of Goldman Sachs Wealth Management, said in January last year, "We have never considered it a qualified investment asset. Think about it: it doesn't generate cash flow, it doesn't generate profits, it can't achieve portfolio diversification, and it can't reduce volatility. You can list a whole bunch of reasons. So it still doesn't qualify as an investment asset; it's just a speculative trading instrument. If people want to speculate, let them. But we don't recommend it because you can't judge whether the current price is reasonable, nor can you give it a true valuation."

You don't need to be bullish on cryptocurrencies to make money from them.

Since then, Bitcoin has not fundamentally changed: it still does not generate cash flow or profit, and its price has fallen 49% from its peak without having any effect on mitigating volatility. Sharmin's assertion remains valid today and will likely continue to do so for some time.

Goldman Sachs' 2020 client presentation stated that Bitcoin "does not constitute a viable investment logic" due to its high volatility. Yet, it is now profiting from Bitcoin's persistent volatility.

However, it's not uncommon for major institutions to reverse their stance. JPMorgan Chase CEO Dimon once called Bitcoin a "pet stone," but now accepts it as collateral; Vanguard Group once warned of its toxicity, but launched its own ETF; BlackRock CEO Fink once linked it to money laundering, but now operates the world's largest Bitcoin fund. And of course, let's not forget the person who proclaimed overnight that crypto would be great again.

Times are changing, and customer demands are evolving, so philosophical debates have been completely set aside. The key point is that their business doesn't require rising coin prices. They're betting on the trading activity of the crypto market, not the price movement of the asset itself. Without direction-neutral market makers and structured lenders providing liquidity, the entire market would collapse. They provide crucial services while taking a cut of the transaction fees; price risk is borne by committed investors, while institutions reap a fixed return through fees.

The collateral requirements for crypto asset loans are extremely stringent. When using Bitcoin as collateral, JPMorgan Chase directly cuts 30%-50% of the credit line, requiring over-collateralization to ensure the bank never incurs losses. Only when the price of Bitcoin halve does the loan begin to face default risk. Automated price data sources continuously monitor market conditions, triggering margin calls when the price falls. Throughout this bear market, banks have been fully protected, and interest payments have continued to be collected.

Traditional investment funds charge a fixed annual management fee. Morgan Stanley charges 0.14%, calculated annually based on the size of its holdings. Options funds, on the other hand, profit from selling contracts: even if the price of the underlying crypto asset falls, the cash flow from transaction fees and options contracts continues unabated.

Native crypto institutions are entirely tied to market sentiment. When Bitcoin or other tokens plummet, investor panic leads to redemptions and stop-loss orders. Since crypto institutions charge management fees based on assets under management, these redemptions directly reduce the fund size, immediately cutting company revenue. In contrast, Wall Street institutions manage trillions of dollars in bonds, cash, stocks, and commodities, allowing them to effectively diversify risk.

There's a key logical flaw here: Wall Street doesn't even need to be optimistic about the industry's future to conquer it. If you believe in the industry's prospects, you have to bet on the direction, and betting on the direction means taking risks. But they've built a mechanism where retail investors bear all the directional price risk, while institutions get guaranteed returns through fee structures.