Goldman Sachs’ major investors are reigniting their enthusiasm for cryptocurrency, spurred by the recent approval of the spot Bitcoin Exchange-Traded Fund (ETF). Following a period of dormancy in 2023, attributed to fallout from the 2022 FTX debacle, these investors are now actively returning to the market, signaling a resurgence in interest.
Max Minton, head of digital assets for Goldman Asia Pacific, reveals that numerous large clients are either already active or contemplating reentry into the crypto space. This renewed engagement follows the approval of ten spot Bitcoin ETFs, a development previously discussed by Goldman Sachs in a Crypto News Flash publication.
Adding context to the situation, Mathew McDermott, Goldman Sachs’ global head of digital assets, disclosed in February 2023 the hesitancy among major investors to reenter the market. McDermott cited concerns about the lack of better-regulated and capitalized entities in the crypto sphere as a significant barrier to adoption. Moreover, the market downturns of 2022, triggered by the collapse of the FTX exchange and resulting in assets trading at about 90% below their all-time highs, further deterred large investors. Notably, Goldman Sachs has consistently defended the industry, with reports affirming that crypto poses no significant risk to the global economy.
Presently, the market is showing signs of recovery, with Bitcoin trading at $67,018, reflecting a 4% surge in the last 24 hours and a year-to-date appreciation of 51.77%.
Interest in crypto is predominantly from existing clients, particularly traditional hedge funds, according to Minton. Goldman Sachs aims to broaden its client base to include asset managers, banking clients, and select digital asset firms.
Despite a relatively quiet year in 2023, Goldman’s crypto trading desk, launched in 2021, has experienced significant growth, offering cash-settled Bitcoin and Ether options trading, along with CME-listed Bitcoin and Ether futures. The bank is poised for further expansion, anticipating a surge in demand, with Bitcoin remaining the primary focus.
While altcoins are gaining traction among some clients, Bitcoin remains the cornerstone of interest. However, the degree of emphasis on Ethereum may shift based on the outcome of the US Securities and Exchange Commission’s decision regarding Ether ETFs.
Beyond crypto trading, Goldman Sachs is actively involved in traditional asset tokenization using blockchain technology. McDermott emphasizes the bank’s focus on tokenization and its potential to reshape financial market infrastructure, highlighting the broader impact of digital currencies.
In McDermott’s words, “The excitement from our side is… seeing how this technology can impact many different parts of the financial system and have a real commercial impact.” As the industry continues to evolve, with financial institutions expanding their digital asset strategies, the potential for transformative change is immense.