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A little more than a year earlier, the investment bank claimed that cryptocurrency was not an asset class. It is now taking a second look.
A upcoming paper from investment banking behemoth Goldman Sachs reveals that the bank has done its homework on cryptocurrency.
Alex Krüger, economist, crypto investor, and founder of asset management company Aike Capital, posted screenshots of the study on Twitter today. He shared some screenshots from a Goldman Sachs article titled ‘Crypto: a New Asset Class?’
Krüger said the report will be made available in its entirety on Goldman Sachs’s website “within a few days.”
The study contains comments from Michael Novogratz, founder and CEO of crypto investment company Galaxy Digital Holdings, and Michael Sonnenshein, CEO of Grayscale, a crypto asset management firm that operates the world’s largest Bitcoin trust, as well as other finance executives and academic economists.
Unsurprisingly, Novogratz responds in the affirmative to the issue of cryptocurrency as an asset class. The CEO “argues that the mere fact that a critical mass of credible investors and institutions is now engaging with crypto assets has cemented their position as an official asset class,” according to Goldman.
Sonnenshein joins him in the report, asserting that crypto isn’t going anywhere: “Institutional investors now generally appreciate that digital assets are here to stay, with investors increasingly attracted to the finite quality of assets like bitcoin—which is verifiably scarce—as a way to hedge against inflation and currency debasement, and to diversify their portfolios in the pursuit of higher risk-adjusted returns.”
Also spoken to in the report is Nouriel Roubini, an economics professor at NYU, who flatly “disagrees with the idea that something with no income, utility, or relationship with economic fundamentals can be considered a store of value, or an asset at all.” Nouriel “doubts the willingness of most institutions to expose themselves to cryptos’ volatility and risks.”
Goldman Sachs and crypto
Last year at this time, Goldman Sachs agreed with the investment banking community’s overall bearishness on cryptocurrency. It flatly denied that cryptocurrencies is a feasible asset class, noting their excessive instability as well as the reality that they “do not show evidence of hedging inflation.”
Goldman Sachs has re-evaluated its original stance after 360 days, one global pandemic, and a historic Bitcoin bull run.
With the exception of this week’s huge plunge, Bitcoin and Ethereum have provided profitable returns for investors for the majority of the global pandemic, sparking a dispute about whether Bitcoin was, in effect, a protection against inflation.
Goldman Sachs has gradually softened their original stance on cryptocurrencies. The investment bank declared its interest in making its own stablecoin in August of last year, and soon after that, it announced it was looking to recruit a Vice President of Digital Assets.
Since then, the financial behemoth has taken significant measures to integrate cryptocurrencies into its banking operations.
For the first time since 2018, Goldman Sachs resumed selling Bitcoin futures in March, and at the beginning of this month, it extended the offering to other Wall Street firms.
Last month, CEO David Solomon said that he believes there will be a “significant evolution” in crypto legislation in the United States.