According to a report by Goldman Sachs, cryptocurrencies such as Bitcoin are considered investable assets. The asset class carries its own specific risk, according to the big bank, as it is still relatively young and going through an adoption phase.
Recently, a detailed report on cryptocurrencies as an asset class by US big bank Goldman Sachs became public. The bank's researchers found that many of the major cryptocurrencies are unique and rightly occupy their specific niches in the market. In this regard, Goldman compares crypto assets to volatile penny stocks that react with wild swings to the smallest news. It is in the area of regulation that the big bank perceives the greatest risk.
Interest among institutional investors
According to Goldman Sachs, the current discussion with institutional clients is no longer about what cryptocurrencies even are. Rather, they want to learn more about the topic and gain access to the asset class. In addition, asset managers and macro funds want to know if cryptocurrencies fit into their portfolios, and how they can build positions.
"Bitcoin is now considered an investable asset. It has its own risk, in part because the asset is still relatively new and going through an adoption phase. However, clients are largely treating cryptocurrencies as a new asset class, which is remarkable. It's not often that we see the emergence of a new asset class." - Mathew McDermott, Global Head of Digital Assets Goldman Sachs
Hedge funds in particular, the big bank said, are interested in arbitrage opportunities and are already actively operating in the market. As early as December 2020, JPMorgan recognized strong interest among institutional investors. While it is unlikely that large institutions would ever make large allocations, even a small shift toward the new asset class could be significant, it said.
Both Goldman Sachs and JPMorgan agree that the biggest hurdle for cryptocurrencies is in the area of regulation. Internationally, there are still no uniform guidelines, although increasingly formal steps have been taken to regulate crypto-financial products.
"A major concern is inconsistent regulatory measures around the globe that hinder further development of the crypto space. I feel like the regulatory tone has become more constructive, but I don't want to get cocky either." - Mathew McDermott, Global Head of Digital Assets Goldman Sachs
Most studies conclude that bans on cryptocurrencies are becoming less common and that comprehensive regulation is being sought. Switzerland, in particular, has one of the most stable frameworks, offering market participants the highest level of regulatory certainty.