Goldman Sachs clients have not voiced interest in exposure to digital assets even after the latest surge in prices. According to this major bank, the situation has changed due to the active involvement of competitors like BlackRock and Fidelity in the industry with their Bitcoin ETFs. Why do neither banks nor bank clients still believe in crypto? What's holding them back? Wouldn't lenders like to get a handle on this segment of the market?
The reasons for the skepticism of Goldman Sachs and their clients towards cryptocurrencies may be as follows:
1. Lack of understanding of the fundamental value of cryptocurrencies. As the chief investment officer of the bank’s Wealth Management unit Sharmin Mossavar-Rahmani noted, “if you cannot assign a value, how can you be bearish or bullish?” Traditional assets have certain fundamental indicators against which their value can be measured. There is no such generally accepted method for cryptocurrencies yet.
2. Concerns regarding the speculative nature and volatility of the cryptocurrency market. Many still view cryptocurrencies as a high-risk instrument for speculation rather than a full-fledged investment asset.
3. Doubts about the decentralized nature of the crypto market. Although cryptocurrencies were conceived as a decentralized and democratic system where decisions are made by all participants, in practice the key influence is concentrated among a small group of people and organizations - founders of large projects, owners of exchanges, wealthy investors. Thus, despite the promised democratization, real power is still centralized, which is at odds with the original idea of cryptocurrencies.
4. Conservative approach and adherence to traditions on the part of large financial institutions. New technologies and asset classes are always met with resistance from established players.
Admittedly, taking a share in a promising growing market would be desirable for any bank. However, reputational risks and regulatory concerns so far prevail for Goldman Sachs. Perhaps their approach will change over time as the industry develops and a clear regulatory framework around cryptocurrencies emerges.