Betrayal or Declaration of War? Goldman Sachs Says Bitcoin is Not an 'Asset Class' but Many Disagree
Sputnik news agency and radio 10:30 GMT 29.05.2020
Digital currencies have not held their value during the ongoing health crisis, with bitcoin losing thousands of dollars in March, reflecting the gloomy mood in global markets. Bitcoin has managed to rebound since then and investors hope that banks will finally start to treat the cryptocurrency as a genuine asset class.
Investment bank Goldman Sachs might have unleashed a war on bitcoin by claiming that cryptocurrencies do not belong to an “asset class”, can be a “conduit for illicit activity” and are generally “not a suitable investment” for the bank’s clients.
In slides prepared for a meeting to assess the impact of the coronavirus pandemic on the US economy, inflation and future policies, the financial institution outlined its rationale for dismissing bitcoin’s role, arguing that cryptocurrencies do not generate a flow of cash like bonds, do not provide “consistent diversification benefits” and do not generate “any earnings through exposure to global economic growth”.
“We also believe that while hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale”, the Goldman Sachs’ Investment Strategy Group wrote.
Betrayal or Declaration of War?
The Financial Times immediately dubbed the bank’s move a “betrayal”, bearing in mind Goldman Sachs’s excitement with this digital currency back in 2017-2018 when it was even mulling the possibility of launching a “bitcoin trading desk” to facilitate investments. However, the new report showed that the financial institution has had a significant change of heart, even sparking a “war” with so-called “cryptocurrency evangelists”, according to CNBC.
Many analysts had anticipated that with ongoing pandemic and unrolling economic crisis, the 151-year-old bank would greenlight investments into bitcoin that recently climbed to $10,000, after a dramatic fall in March to less than $5,000. But following the bank's comments on Wednesday, some prominent crypto-investors and figures in the industry, including the co-founders of the Gemini exchange, the Winklevoss twins of Facebook fame, slammed the bank’s vision.
“Bitcoin was declared a commodity by the CFTC in 2015 in the Coinflip order...so yea it's an asset whose price is set by supply and demand. Just like gold. Just like oil. It's a commodity”, Cameron Winklevoss wrote on Twitter, while joking that “2014 just called and asked for their talking points” from Goldman Sachs’ back.
“The more I think about it, the Goldman report is probably a head fake”, his brother Tyler added, hinting at the possibility that the bank was just trying to throw its competitors under a bus by moving in the opposite direction after initially appearing to take up an anti-bitcoin position.
“It’s important to note that Goldman Sachs’ competitors Fidelity and JP Morgan have made significant investments in cryptocurrency”, argued Dave Hodgson, chief investment and managing director of NEM Ventures, as cited by CNBC.
According to the analyst, Goldman Sachs has just “risked causing its investors to miss out on one of the best performing asset classes in the past 100 years” with its report.
Despite the Goldman Sachs' report, bitcoin is still trading at around $9,500, gaining 2.9% since Wednesday.
