Goldman Sachs’ Cryptocurrency Investment Strategy

Unlike what everyone expects in the crypto world, Goldman Sachs did not vote for cryptocurrency. Goldman Sachs held a customer conference call on Wednesday (May 27) as scheduled, titled “The US Economic Outlook and the Impact of Current Policies on Inflation, Gold, and Bitcoin”, focusing on macroeconomic trends and their impact on financial markets Impact. Bitcoin and cryptocurrencies became the central topics of this conference. On the eve of the meeting, when the name of the meeting flowed out, the market was speculating: could Goldman Sachs also begin to embrace the cryptocurrency and “shout orders” for Bitcoin? Today, it is poured in a pot of cold water. 1590638983545546

Cryptocurrencies are not assets and clients are not recommended to invest

 Goldman Sachs stated in the conference materials that the sovereign currency should meet three standards, namely the medium of exchange, the unit of valuation and the means of value storage. Therefore, cryptocurrencies including Bitcoin should not belong to any asset because:

  • They do not generate cash flow like bonds
  • They do not gain any income by participating in global economic growth
  • Due to unstable correlation with other assets, they cannot provide stable decentralized returns
  • Given Bitcoin’s 76% historical volatility, it cannot suppress volatility. For example, on March 12 this year, the price of Bitcoin fell by 37% in a single day.
  • They do not exhibit the function of hedging inflation.

Goldman Sachs believes that if the value-added of a security depends mainly on whether others are willing to pay a higher price, then this product is not suitable for customer investment. It also believes that hedge funds may consider trading cryptocurrencies attractive because cryptocurrencies are highly volatile, but this does not constitute a viable investment reason. 1590638983705172

Cryptocurrencies are not scarce resources, they encourage illegal activities

 Since the birth of Bitcoin in 2008, thousands of cryptocurrencies have appeared, with a total market value of approximately $ 250 billion. Although the supply of a single cryptocurrency is limited, the cryptocurrency as a whole is not a scarce resource. For example, 3 of the 6 largest cryptocurrencies belong to Bitcoin and its forks, namely Bitcoin, BCH and BSV. Although most cryptocurrency ledgers are permanent, auditable public records, cryptocurrencies still encourage illegal activities such as Ponzi schemes, ransomware, money laundering, and the dark web market.


Cryptocurrency infrastructure is still immature, vulnerable to hacker attacks or unexpected losses

 Although the crypto currency must be used under the control of the corresponding private key, users need to be careful to protect those private keys. Many cryptocurrency holders allow exchanges or other hosting providers to control their private keys, which makes them the main target of hackers. It is expected that hacker attacks and unexpected losses have caused the loss of more than one billion dollars in cryptocurrencies. Goldman Sachs also took stock of large amounts of hacker money theft in the past 10 years, such as Mentougou in 2014, Binance and Bithumb in 2018.


Cryptocurrency craze dwarfs historical bubble 

At the end of 2017, the cryptocurrency bubble surpassed the bubble level of the previous financial markets, and even exceeded the level of the Dutch “tulip mania” from 1634 to early 1637. Goldman Sachs compared Bitcoin BTC and Ethereum ETH, the two most valuable cryptocurrencies by market value, with the tulip mania and the NASDAQ stock bubble. After comparing the historical price high with the average price of the previous year, the data shows: 

  • The Nasdaq Composite Index rose 109% 
  • Tulip prices rose by 485% 
  • Bitcoin rose 2292% 
  • Ethereum rose 14193%


The meeting was hosted by Goldman Sachs Investment Strategy Group, which is part of Goldman Sachs ’wealth management department and provides asset allocation advice to high net worth clients. Moderators of the conference call included Sharmin Mossavar-Rhami, Goldman ’s chief investment officer, Jason Furman, a professor of economics at Harvard ’s Kennedy School, and Jan Hatzius, Goldman ’s chief economist and head of global research. 

Goldman Sachs’s opposition was also met with dissent by cryptographers, and the Winklevoss brothers, the co-founder of the cryptocurrency exchange Gemini, responded quickly. Tyler Winklevoss said that Goldman Sachs may not have a moral advantage in the illegal use of capital. Goldman Sachs said that it is not recommended to provide bitcoin for the client’s portfolio on a strategic or tactical basis. The subtext is “don’t want our clients to buy bitcoin and realize that they no longer need us.” Cameron Winklevoss believes that Bitcoin’s official status as a commodity means that its researchers need to keep pace with the times. 

Of course, there are also bitcoin opponents who agree, and gold supporter Peter Schiff just tweeted that Goldman Sachs warned customers to avoid using bitcoin is correct. But its assessment of the US economy, dollar and inflation is wrong. Once they finally figure out what is obvious, they will advise customers to buy gold, but the price is much higher. 

For investors in the crypto world, Goldman Sachs’s generous user funds, and endorsements by traditional institutions, once a vote for the cryptocurrency is voted, it will definitely be of great benefit to the market. But Goldman Sachs has always been opposed to user asset allocation cryptocurrencies. Earlier, according to Bitcoinist, California-based Crypto asset wealth management company Digital Asset Investment Management (DAIM) said that the company was at risk of losing an important customer under the intervention of two financial giants, Goldman Sachs and JPMorgan Chase. The company claims that it has an institutional investor ready to invest in bitcoin, but changed its mind after talking to consultants from Goldman Sachs and JPMorgan Chase, who advised it to use traditional investment solutions and focus on bonds, securities and similar traditions The asset class, volatility and risk of these assets are lower than Bitcoin.

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