A lot has been going on lately and banks are taking a stand on Bitcoin. What do the analysts have to say about the cryptocurrency? Does it matter what a bank says?
According to analysts at Goldman Sachs, the growth of global adoption of Bitcoin does not necessarily increase its price. That statement obviously contradicts the assumption of many who claim precisely the opposite. Automatically, the public refuses to listen to such claims, because people prefer to hear what they want to hear. They seem to forget something very important: You learn from everything and it is always useful to hear divergent opinions. What does Goldman Sachs actually say about Bitcoin?
Goldman Sachs has said a lot on different occasions. The first thing to consider is that Goldman Sachs is made up of departments. Each department has its analysts, who write the reports aimed at customers. Two additional details to consider are that analysts earn their money on performance, and the client’s goal is to grow financially. The analysts at Goldman Sachs aim to build a career, and the client wants to make money. Therefore, seriousness and objectivity are required.
On Twitter, matters are completely different. In most cases, the priority is to increase the number of followers, as this adds to credibility, which in turn leads to greater opportunities. Some want a job, sell a course, meet important people, collect donations or live on advertising. Others simply want validation to feel popular. Now, to get an increasing number of followers, Twitter users have to stay very active and always on the look for controversy. The secret is to get the public’s attention. The short phrase, the clichés, the controversy, the promise, and the irreverence are the most used tools. In short: Radicalism sells.
On Twitter, everyone is a genius, and everyone understands the great conspiracy. In other words, everyone knows perfectly who the enemies are: the banks, the governments, the press, the experts, the corporations, and the Federal Reserve of the United States. The tribe consists of favorite influencers and people who think almost alike. The complaint is what unites. Inquiry into an evil system is the flag.
Despite the above mentioned, banks can be viewed as just another client interested in Bitcoins as one product among others. In this context, banks can have a say in regards to cryptocurrencies.
Goldman Sachs analysts Zach Pandl and Isabella Rosenberg have stated that “while adoption [of Bitcoin] may increase valuations, it also increases correlations with other financial market variables, which would reduce the diversification benefit of holding the asset class.” Adoption is a double-edged sword.
Analysts stressed that Bitcoin is not immune to macroeconomic forces, including monetary tightening by the Federal Reserve. They are obviously pointing to the positive correlation between the price of Bitcoin and other risky stocks like tech stocks. This is when things get complicated because here the evidence contradicts the dogma.
How can people interpret the Goldman Sachs analysts’ statements?
First, the claims are not false. Bitcoin, as it has grown in size, has also gained correlation and stability. In addition, Bitcoin is not a conservative, but obviously a risky asset. In other words, its high profitability is not free. What they are really saying here is that we will no longer grow at the same rate as before. There will be growth. However, this will be slower growth due to increased capitalization.
The Bitcoin of 2010 is not the same as the Bitcoin of 2013, as the Bitcoin of 2018 is not the same as the Bitcoin of today. The growth of a market of a couple of million dollars has no comparison to the growth of a market of three or more billion dollars. As the market grows, its behavior will change. Investors will gain something and lose something. It will be a much more consolidated asset in many aspects. However, it will lose much of its initial appeal.
By Audy Castaneda
