Goldman Sachs said Bitcoin and other cryptocurrencies can’t be treated as an asset class because of its inability to generate returns in tune with global economic growth. Experts from the crypto-world slammed Goldman for its yet another Bitcoin-bashing rhetoric.
Over the last few years, government agencies and regulators have been struggling to identify and classify cryptocurrencies. Due to Bitcoin‘s volatile status, many financial experts have refused to give it the ‘currency’ status and rather treated it as an asset class. However, Wall Street banking giant Goldman Sachs brings a fresh twist to this crypto-related matter.
On Wednesday’s investor call Goldman Sachs’ experts discussed the recent policies for Bitcoin and Gold in the context of the COVID-19 crisis. In its slideshow, Goldman Sachs cites some hacks and other losses related to cryptocurrencies. Besides, it also mentions the use of digital assets for illicit activities.
The slides also state that cryptocurrencies like Bitcoin have received a lot of attention. Interestingly, Goldman experts think that Bitcoin and other digital currencies do not belong to the asset class. The reason is unlike bonds, Bitcoin has an inherent lack of cash flow and its inability to generate returns in tune with global economic growth.
Additionally, Goldman also cited Bitcoin’s massive volatility and its drop to a 12-month low during the market correction of March 2020. The Goldman Sachs head of research and a Harvard Economic Professor referred to the Bitcoin forks as “nearly identical clones”.
Goldman Sachs Views on Crypto in Contrast to Bloomberg’s
While many must have expected Goldman to stress the importance of Bitcoin during this economic crisis, it didn’t happen so. The Goldman Sachs’ experts seemed to be stressing more on how Bitcoin is still not relevant to the global economy. Besides, Goldman’s view of Bitcoin not being an “asset class” is in stark contrast to Bloomberg’s.
Earlier this year, billionaire Micheal Bloomberg openly called Bitcoin and other cryptocurrencies as an asset class. He also called for a transparent regulatory framework saying:
“Cryptocurrencies have become an asset class worth hundreds of billions of dollars, yet regulatory oversight remains fragmented and undeveloped. For all the promise of the blockchain, Bitcoin and initial coin offerings, there’s also plenty of hype, fraud and criminal activity.”
Other experts from the crypto-world also weighed their opinion on Goldman’s investor call. Tom Masojada, co-founder of OVEX Digital Asset Exchange rejected Goldman’s ‘lack of cash flow’ statement for Bitcoin. He tweeted:
– Gold does not generate cashflows
– Art does not generate cashflows
Many investments that Goldman labels as ‘suitable for clients’ do not generate cashflows and are primarily dependent on on whether someone is willing to pay a higher price at a later date
— Tom Masojada (@tom_masojada) May 27, 2020
Kevin Kelly, former equity analyst at Bloomberg and co-founder of Delphi Digital, said:
“One could argue bitcoin isn’t backed by anything, but to liken it to a game of hot potato ignores the subjective value such a novel asset provides”.
He further added that Bitcoin’s current value is backed by “the demand for an apolitical speculative asset that may or may not turn out to be one of the world’s most valuable safe havens.”
In the concluding statement, Goldman said that it doesn’t recommend its clients investing in Bitcoin on a strategic or tactical level. Responding to this, Kyle Davies, co-founder of cryptocurrency trading firm Three Arrows Capital, said:
“I was hoping for a more constructive call. The fact that they are having this call, period, means there’s a lot of interest.”
It looks like Goldman’s investors’ call included nothing much special, but the Bitcoin-bashing rhetoric.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.