on the crypto
Goldman Sachs held a remote meeting with investors this week to discuss current policies for bitcoin, gold and inflation in the context of the COVID-19 crisis. In summary, the bank is not yet a fan of bitcoin or other cryptocurrencies.
The critique of Bitcoin
A presentation released before the meeting mentioned hacks and other cryptocurrency issues, as well as their potential to "encourage illicit activities." Seven of Goldman's 35 slides mention bitcoin, but meeting attendees actively discussed the well-known cryptocurrency in the past five minutes only.
Among the arguments that surfaced, Goldman noted that although cryptocurrencies such as bitcoins "have received tremendous attention", "they are not an asset class." Because? The reasons include bitcoin's inherent lack of cash flow, unlike bonds, and its inability to generate earnings through exposure to global economic growth.
Goldman also notes the volatility of bitcoins, citing the recent drop to a 12-month low in early March. The price went up nearly 5% to $ 9.200 a few hours before the meeting.
Some professional cryptocurrency analysts have judged Goldman's analysis superficial. Tom Masojada, co-founder of OVEX Digital Asset Exchange, found Goldman's cash flow argument particularly strange.
"Many investments that Goldman calls" customer-friendly "do not generate cash flow and depend primarily on someone being willing to pay a higher price later," he said on Twitter.
"It could be argued that bitcoin is not supported by anything, but assimilating it to a hot potato ignores the subjective value that a new asset provides," said Kevin Kelly, former Bloomberg equity analyst and co-founder of Delphi Digital, a company in cryptocurrency research that recently released a full bitcoin report.
The current value of Bitcoin, according to Kelly, is supported by the "demand for an apolitical speculative asset that may or may not prove to be one of the world's most precious safe havens".
Goldman does not recommend Bitcoin for strategic investments
Goldman's two speakers for the meeting, namely the head of research and a Harvard economics professor, said that several fork bitcoins, which they called "almost identical clones", occupy three of the six largest cryptocurrencies based on market value .
With this, Goldman inferred that cryptocurrencies as a whole "are not a scarce resource," according to the presentation. This criticism is "particularly noteworthy," Watkins said. "Forks are assets themselves and have nothing to do with bitcoins."
Finally, Goldman does not recommend invest in bitcoin "on a strategic or tactical basis for client investment portfolios, even if its volatility could lend itself to risk-oriented traders".
"I was hoping for a more constructive meeting," said Kyle Davies, co-founder of the cryptocurrency trading company Three Arrows Capital. However, he added, "The fact that this meeting was held means that there is a lot of interest."