Demand for cryptocurrencies surged in the past year as people often have been allocating more time to the digital medium. Cryptocurrencies have always levitated between institutional adoption and scrutiny by centralized institutions. Goldman Sachs announced it's time to take Bitcoin more seriously, labeling it as an investible asset. Through the extent of Goldman Sachs's announcement, cryptocurrencies are gaining interest as an investable asset from institutional entities and higher capital funds.
The Coinbase IPO pushed the cryptocurrency market towards the extreme. Retail investors and institutional or corporate investors all craved a piece of the promising technology. To that end, 2021 bears a resemblance to the dot com era when a forward-looking technological advancement was breaking into the mainstream. As reported by JP Morgan, Bitcoin is becoming an attainable investment asset, and their views are shared by other global investment banks such as Goldman Sachs.
Goldman Sachs Adds A Stamp Of Approval
The Global Head of digital assets at Goldman Sachs, Mathew McDermott, discussed in a new research article that Bitcoin “is now considered an investable asset” because of its individual characteristics. In fact, the piece pivots Goldman Sachs's previous position towards a more attainable asset for investors. Partly because of its “idiosyncratic risk,” investors are viewing it as an investible asset. McDermott highlights Bitcoin's emergence as a new asset class is a rare occurrence.
Because Bitcoin is still in the adoption phase, any regulatory actions on the cryptocurrency market will eventually alter the future appreciation of cryptocurrencies. Regardless, data presented by Goldman Sachs emphasizes that investors are still “keen” on investing in crypto assets. Although clients are treating Bitcoin as a new asset class, the author indicates crypto-assets trade unlike any regular stock, pointing to the heightened volatility. Despite Bitcoin's comparison to digital gold, the leading cryptocurrency is viewed as a “risk-on asset” as its price is densely affected by every piece of news.
Concerns regarding regulatory actions could be advantageous for cryptocurrencies; however, pessimistic governmental views towards crypto creates shifts in investor perception. Goldman Sachs has acknowledged the fact that crypto is a new asset class, as the message from investors such as PayPal or Square investing into crypto resounds through the market. Still, the attention Bitcoin receives from institutional investors is dissimilar to their views from 2017.
Although Bitcoin accounts for high volatility, research indicates it is one of the main reasons investors are drawn to it. Active price movements in Bitcoin constitute the basis of a store of value. Goldman Sachs emphasizes that institutional investors are keener towards understanding the underlying technology and how to gain access to the asset rather than asking the question of “what is it.” Additionally, investors' mentality towards Bitcoin and the new asset class has generated fear of missing out on behalf of financial investors.
As stated by Goldman Sachs's, Senior Multi-Asset Strategist, Bitcoin's risk-reward ratio can add value to investors' portfolios. What's more, Goldman Sachs reentered the cryptocurrency market due to client demand, establish a dedicated crypto desk.