Recently, Live Bitcoin News reported that financial investment firm Goldman Sachs engaged in a client call to discuss assets like bitcoin and gold. This led some to believe that the company was suddenly a fan of bitcoin, and that it saw potential in the digital asset now that the American economy was showing signs of struggle.
Goldman Sachs Doesn’t Care for BTC Much
Sadly, this wasn’t quite the case. Goldman Sachs is now listing several reasons as to why bitcoin “is not an asset class,” and why crypto makes a poor investment in general.
In a recent statement, the company said that bitcoin “does not generate cash flow” the way bonds do. One can’t help but argue against this, given that since the introduction of the coronavirus to the United States, bonds haven’t produced much cash flow themselves.
In addition, bitcoin does not generate cash in the same way – that’s for certain – but granted the currency enters a bullish phase, there are still plenty of returns for users to enjoy.
Another reason given by the company is that bitcoin possesses unstable correlations, and thus does not provide “consistent diversification benefits.” This opens the door to heavy debate. It’s been said in the past that bitcoin correlates, most of the time, with the U.S. stock market. When stocks are up, so is bitcoin, and vice versa.
For the most part, stocks can be just as volatile and uncoordinated as bitcoin, so it’s strange that so many analysts and investors are willing to dismiss BTC outright, yet consistently act like stocks are a major pathway to extreme wealth and solidity. While BTC doesn’t offer diversification – it is, after all, a single asset – it’s part of an industry that does.
Goldman’s final reason was that bitcoin does not hedge “against inflation.” Again, this is open to questioning, primarily because many general traders now appear convinced that bitcoin can do this very thing. As the coronavirus spread through the United States, government officials gave the greenlight to a stimulus package that brought $2.2 trillion back to the economy, giving many Americans $1,200 to spend or save as they wished.
While this may have been a solid move in the short run, many have criticized the rash behavior of the U.S. government, claiming that this could potentially lead to inflation and other economic problems. Many exchanges, i.e. Coinbase, reported stimulus checks being used to purchase crypto and bitcoin, as customers expressed inflation anxiety and saw bitcoin as an answer. Thus, it looks like many standard traders would disagree with Goldman’s analysis of BTC’s power.
It’s Based on What People Will Pay for It
The company explained:
A security whose appreciation is primarily depending on whether someone else is willing to pay a higher price for it is not a suitable investment.
And this leads to another big issue… BTC is not a security. It’s a commodity. It’s regulated by the Commodity Futures Trading Commission (CFTC). This suggests that Goldman doesn’t even know what category BTC falls under.
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