The world’s largest investment bank, Goldman Sachs, announced during its client call that cryptocurrencies like Bitcoin are not an asset class. Needless to say, the backlash and criticism the statement drew were terrific.
Soon after Goldman’s presentation was circulated, critics started pouring in. Some sections of BTC supporters suspect it to be sheer hypocrisy.
Goldman’s justification towards Bitcoin investments
The presentation prepared by Goldman Sachs reads:
“Cryptocurrencies including Bitcoins are not an asset class.”
The deduction given by them is based on the following points:
- Bitcoin does not generate cash flow.
- No exposure to global economic growth means BTC won’t generate any earnings because of various developments worldwide.
- BTC is highly volatile. The report cited the case of the 37% drop in BTCUSD on March 12.
- There is no proven case of BTC acting as an Inflation hedge.
The presentation also states that Hedge funds find BTC attractive simply because of the high volatility.
Here is the BTCUSD daily chart. Source: TradingView.com
Bitcoin supporters are countering Goldman’s claims
Goldman’s entire report on BTC is more or less based on the volatility of Bitcoin. They also state that its price is dependent on the buying and selling of people. But that is the exact way the stock markets also work! Being an investment bank, they know it all so well.
Of course, Bitcoin is volatile! And so are the stock markets. Everyone knows about the great stock market crash of 2008 and the Great Depression of 1929. Some stacks crashed more than 50% in a day during those crashes!
Analysts suspect Goldman to be secretly buying BTC
Goldman is known to adopt notorious practices for obtaining profits. Earlier during the subprime crisis of 2008, Goldman had told its several clients that the US Housing market could never fail.
At the same, the bank took a massive short position on the US housing markets. So, when the housing market finally crashed, several people lost a lot of money. Goldman, however, made billions on their short position.
People suspect Goldman Sachs could be adopting some the same tactics this time for Bitcoins!