Skepticism reigns supreme towards crypto in Goldman Sachs midst after a new report suggested that cryptocurrencies are speculative and not an asset class.
Goldman Sachs Cautions Investors about Crypto
If Goldman Sachs treats Bitcoin as flower petals in the classic game of chance “He Loves Me, He Loves Me Not,” the investment bank will soon have to make up its mind because it’s running short on petals. The bank, which has shown some form of qualified support for cryptocurrencies in recent months, has also issued a new report outlining its high-risk profile.
In fact, the bank argued that cryptocurrencies were not a “viable investment,” even though it has been rallying behind Ethereum and Bitcoin projects over the last weeks. One popular argument that Goldman Sachs took on was whether Bitcoin constituted digital gold in any form.
Over the last months, the idea that Bitcoin can serve as a digital hedge against mounting inflation has dominated investment circles. Millionaires from all over the world have started dropping some of their precious metal reserves and shifting to what they thought and still do is digital gold.
Tesla’s decision to invest $1.5 billion in Bitcoin did drive the currency’s value and helped it cross the $60,000-threshold. The currency started self-correcting, following Elon Musk’s Twitter antics, suggesting that Tesla may end up divesting from Bitcoin due to environmental concerns. Regardless of how Musk has influenced Bitcoin and cryptocurrencies, Goldman Sachs has preferred to keep a cool head about these assets.
“The argument that Bitcoin and cryptocurrencies are a digital version of gold does not confer any value to Bitcoin and other cryptocurrencies, because gold itself is not a consistent or reliable store of value,” the bank’s report read. bank suggested that US equities make for a much “safer bet” when speaking about investment opportunities in general.
Goldman Sachs disagrees that Bitcoin comes anywhere close to “digital gold,” and it doesn’t believe that the currency should be a part of a “diversified portfolio.”
Optimism and Pessimism Go Hand-in-Hand in Crypto Space
JPMorgan CEO Jamie Dimon has had similar arguments about cryptocurrencies and Bitcoin, even though his bank has been getting behind crypto, even if only to appease eager wealth clients. Dimon, who is a well-documented Bitcoin skeptic and has issued at least one obituary predicting the currency’s demise, has toned down his criticism to mostly match what his company is trying to achieve by introducing more clients to the crypto space at their request.
Goldman Sachs did acquiesce that cryptocurrencies can be a good speculation asset, with leaders such as Dogecoin and Bitcoin making some sense when couched in those terms. While Dogecoin’s speculative value has been its strength, with the currency up 12,000% over the last year, Goldman Sachs’ report stated that the rapid price appreciation of cryptocurrencies and media blitz has been “detrimentally opposing views of high-profile market participants.”
The bank went further and argued that Bitcoin could not be considered a strategic asset class in a client’s investment portfolio. “We do not recommend investing in cryptocurrencies as an asset class,” the report concluded.
Regardless of opposition, there has been support for cryptocurrencies. Billionaire Mark Cuban has praised Bitcoin, Ethereum, and Dogecoin, even though his most recent interaction with TITAN cost him dearly.