Valencia, Spain, April 5th 2021: A golden bitcoin on the dirty hand of a miner. Metaphor of mining … [+]
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Wall Street titan Goldman
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Sachs seems to be all in now when it comes to Bitcoin and claims the cryptocurrency currently has a 20% share of the “store of value” market. This means the asset, Bitcoin, can maintain its worth over time without depreciating, in comparison to precious metals or some currencies. Even though the digital currency remains highly volatile, trading above $46,000, it’s far from the all-time high in November 2021 of $69,000. Will Goldman Sachs’ cosign of Bitcoin as digital gold, increase confidence in other major financial institutions to do the same?
The Breakdown You Need To Know:
With the price of gold currently around $1,800 per ounce, Bitcoin has the potential to cross the $100,000 milestone in the coming years, according Goldman Sachs analyst Zach Pandl. He wrote that within a few years if its share of the store of value market were to “hypothetically” reach 50% the cryptocurrency could reach this six-figure milestone.
“Bitcoin may have applications beyond simply a “store of value” – and digital asset markets are much bigger than Bitcoin – but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for Bitcoin returns,” Pandl wrote according to Reuters.
CultureBanx noted that as institutional investors like Goldman Sachs engage in these derivatives, they’ll be looking to ease their cautiousness by having a reliable benchmark for their performance. Using a commodity like gold is perhaps a good place to start as the financial firm pointed out that Bitcoin has a $700 billion market cap, compared to gold’s nearly $2.6 trillion owned as an investment.
Goldman Sachs has already allowed their wealth management clients to invest in Bitcoin and other digital assets. Its private wealth management division is catered towards the wealthiest of clients, those with a minimum of $25 million to invest and they wanted in on the Bitcoin action. While Goldman Sachs dips its toes in the cryptocurrency markets, Morgan Stanley
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has also started offering clients investments to the emerging asset class.
Situational Awareness:
Bitcoin’s value has increased more than 17% over the last 12 months and Goldman restarted its cryptocurrency trading desk in 2021. Initially, they did not actually trade Bitcoin, instead the bank used its own money to trade Bitcoin futures contracts for clients. Part of the reason the firm decided to go this route is due to several inquiries received from hedge funds, foundations and endowments which had received donations from Bitcoin millionaires.
