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Bitcoin is now considered an investable asset, according to a new research report from Goldman Sachs, although it carries its own idiosyncratic risk, in part because it is relatively new and is in an introductory phase.
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The new report says that credible investors’ interest in crypto assets has increased and old financial institutions – including Goldman Sachs – launched new offerings as cryptocurrency prices remain extremely volatile, particularly due to news of regulatory crackdowns, environmental concerns and tightening Tax Audits, “Crypto is undoubtedly Top of Mind.”
What makes a cryptocurrency like Bitcoin – which has no income, no practical use, and high volatility – a good store of value is because “the world voted for them to believe,” it is Michael Novogratz, co-founder and CEO of Galaxy Digitally commented in the report.
Novogratz adds that the broader crypto ecosystem holds great promise for investors in particular with regard to three developments in the crypto ecosystem – payments, decentralized funding (DeFi) and non-fungible tokens (NFTs) – which are largely built on top of the Ethereum network.
Goldman Sachs says it has got back into the crypto space based on customer demand.
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“When compared to other assets, Bitcoin does not behave as one would intuitively expect given the analogy to digital gold; So far it has been geared more towards risky investments. But clients and beyond are largely treating them as a new asset class, which is remarkable – it’s not often that we see a new asset class emerge, ”noted Mathew McDermott, GS Global Head of Digital Assets, in the report.
He adds that FOMO has a role to play considering how much Bitcoin and other crypto assets have been valued and how many prospects of all flavors have jumped into the space.
“But I see investor interest in crypto all the time; We have crossed the Rubicon in terms of institutional buy-ins, and the area is of much greater value than it was three or four years ago, ”he wrote.
In terms of the percentage of customers Goldman Sachs works with who are interested in the space versus those who actually work in the space, McDermott says that over the past year, many customers have explored rather than exported. After what they see and hear anecdotally, that seems to be about to change. According to a survey by the Goldman Sachs digital asset team conducted in early March, of the 280 customers who responded, 40% have some form of exposure to cryptocurrencies, with 61% expecting their holdings to be in the next 12 Months.
Bitcoin has had an extremely volatile couple of weeks and stood at $ 38,000 this morning.
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About the author
Yaël Bizouati-Kennedy is a retired full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a vice president / senior content writer for major NYC-based financial firms, including New York Life and MSCI. Yaël is now freelance and most recently worked with Dr. Sean Manion authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”. (CRC Press, April 2020) She has two Masters degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.