Goldman Sachs: Cryptocurrencies including Bitcoin are not an asset class

Leading US bank outlines its crypto scepticism


Goldman Sachs, one of the largest investment banks in the world, will hold a conference call with investors on Thursday on “US Economic Outlook & Implications of Current Policies for Inflation, Gold and Bitcoin.”

Even before the call has started, let alone finished, the bank’s take on digital assets and Bitcoin (BTC) in particular has already excited comment from the crypto-Twittersphere.

In slides made available before the discussion and circulated by CoinDesk’s Zack Voell via Twitter, Goldman outlined its belief that “Cryptocurrencies including Bitcoin are not an asset class.” Justifying its judgement, the bank stated its view that cryptos:

Do not generate cash flow like bonds
Do not generate any earnings through exposure to global economic growth
Do not provide consistent diversification benefits given their unstable correlations
Do not dampen volatility given historical volatility of 76 per cent
Do not show evidence of hedging inflation

In another blow Goldman observed that “while hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale.”

Such a statement ends the rumbling and intensifying rumour mill of late, which has suggested that Goldman could be preparing to expose its investors to Bitcoin.

So far, the world’s leading cryptocurrency has seemingly taken two steps forward then two steps back throughout 2020.

A measured public vote of confidence from hedge fund billionaire Paul Tudor, a successful halving and the news that JPMorgan Chase is providing services to its first crypto exchanges (Gemini and Coinbase) has boosted Bitcoin’s reputation among institutional investors.

At the same time, the crypto also suffered a 37 per cent one-day drop, which dented its reputation as a reliable store of value and has been criticised by the Chief Investment Officer of one of the world’s largest and most-watched financial institutions.

Another of Goldman’s slides states: “Despite that most cryptocurrency ledgers are permanent and auditable public records, cryptocurrencies nevertheless abet illicit activities such as Ponzi schemes, ransomware, money laundering and darknet markets.”

Only time will tell as to the effect of Goldman’s scepticism on institutional investor sentiment. In the immediate term, Bitcoin has been unaffected by Goldman’s opinion, standing up 4.4 per cent at $9,173 by late-Thursday afternoon. 

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