In a new report by Goldman Sachs, he found that cryptocurrencies are an unviable investment. Yes, Goldman Sachs ‘ Account and Fund Management Division expressed that cryptocurrencies are not a viable investment for diversified portfolios.
In this context, the report cites several reasons for the pessimism stated. Including the high energy consumption of the mining process and the possibility of technological advances. Such as the emergence of quantum computers, which will make blockchain technology obsolete.
Likewise, the risk of increased regulatory oversight is also observed, limiting cryptocurrency as a speculative asset. The limited number of regulated exchanges also contributes to the lack of available crypto asset data. The report says that the quality of the data is improving, but the level remains inadequate.
The report highlights:
“After analyzing various valuation methodologies. And, applying our multivariate strategic asset allocation model, we came to the conclusion that cryptocurrencies are not a viable investment for diversified portfolios.”
At the same time, Goldman Sachs stresses that cryptocurrencies will help long-term economic development
However, analysts pointed out that the components of the cryptocurrency ecosystem (including blockchain technology) will contribute to long-term economic growth.
This assessment is strikingly different from Goldman Sachs ‘ March statement. During the report in question, it was indicated that the institution announced its intention to offer work with cryptocurrencies to its clients.
It is also worth noting that in May 2020, the same division of Goldman declared that cryptocurrencies are not an asset class. Bitcoin has been branded as an inappropriate investment for customers, and its rise has been attributed to a 17th century tulip fever craze. Bitcoin then traded around $ 9,200. Since then, its rate has grown at least 4 times.
Goldman restarted a dealing desk this year to help clients trade Bitcoin-linked quoted futures. McDermott said the bank also plans to facilitate operations through publicly traded notes following Bitcoin.
Despite all the warnings from regulators about the risks posed by the extreme volatility of cryptocurrencies and their role in money laundering, investment banks are taking a step forward to offer Bitcoin services to their large clients. Even after prices plummeted in May. Falling from about $ 60,000 to $ 33,000 in a matter of days, hedge funds are still excited about Bitcoin trading.
The bank has also invested in cryptocurrency startups. He put $ 5 million into a Blockdaemon fundraising round. A company that creates and hosts the computing nodes that make up blockchain networks.
Other banks have expanded crypto operations
Other banks have also expanded their crypto operations. Cowen Inc. For example, it plans to offer “institutional grade” custody services for cryptocurrencies. Standard Chartered Plc is setting up a joint venture to buy and sell virtual currencies, although HSBC Holdings Plc is avoiding Bitcoin for now.
Finally, the Goldman Sachs report concludes that the components of the cryptocurrency ecosystem. Including blockchain technology, they can contribute to long-term economic growth.
On the other hand, despite bearish research on digital assets, Goldman is further expanding its crypto dealing desk. Reportedly, adding Ethereum futures and options.
According to Mathew McDermott, head of digital assets at Goldman, there is still a customer demand for cryptocurrency trading despite a recent drop:
In fact, a lot of interest has been seen from clients who are eager to trade, as they find these levels as a slightly more acceptable entry point.
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