In a conference call with investors yesterday (May 27), the Investment Strategy Group (ISG) -- which is within the Consumer and Investment Management Division -- at Goldman Sachs explained why the American investment bank does not recommend Bitcoin for its clients' investment portfolios.
By looking at the slides used by Goldman, we can see that this was the summary of the argument against investing in Bitcoin:
- Cryptocurrencies (such as Bitcoin) are not an asset class for the following five reasons:
- "do not "genrate cash flow like bonds"
- "do not generate any earnings through exposure to global economic growth"
- "do not provide consistent diversification benefits given their unstable correlations"
- "do not dampen volatility given hstorical volatility of 76%"
- "do not show evidence of hedging inflation"
- Although individual cryptocurrencies may have "limited supplies", cryptocurrencies are not really scarce (since thousands of different cryptoassets have been created since 2008).
- Cryptocurrencies have been used for illicit activities.
- It is possible to lose crypto funds by losing private keys or as the result of centralized exchanges (or other crypto custodians) getting hacked.
- The U.S. dollar will not be "debased".
This led Goldman to come up with the following takeaway:
"We do not recommend bitcoin on a strategic or tactical basis for clients’ investment portfolios even though its volatility might lend itself to momentum-oriented traders."
Naturally, members of the crypto community on Twitter were not impressed by Goldman's argument.
The two most vocal members of Crypto Twitter on this subject were the Winklevoss twins:
Hey Goldman Sachs, 2014 just called and asked for their talking points back.— Cameron Winklevoss (@winklevoss) May 27, 2020
Bitcoin was declared a commodity by the CFTC in 2015 in the Coinflip order...so yea it's an asset whose price is set by supply and demand. Just like gold. Just like oil. It's a commodity.
Goldman Sachs employees may want to attend this. https://t.co/axmi6EkbMU— Tyler Winklevoss (@tylerwinklevoss) May 27, 2020
Crypto used to be where you ended up when you couldn’t make it on Wall Street. The quality of Goldman Sachs’ recent research on #Bitcoin demonstrates that there has been a talent flippening. Today, Wall Street is where you end up when you can’t make it in crypto.— Tyler Winklevoss (@tylerwinklevoss) May 27, 2020
Goldman Sachs: In 2019, $2.8 billion in Bitcoin was sent to currency exchanges from criminal entities.— Tyler Winklevoss (@tylerwinklevoss) May 27, 2020
Fun Fact: Goldman Sachs facilitated $6 billion in money laundering via 1MDB scandal between 2012-13.
Double standard much?
Crypto educator and YouTube personality Ivan Liljeqvist:
Barry Silvert, Founder and CEO of Digital Currency Group (which is parent of Grayscale Investments):
Bitcoin market cap > Goldman Sachs market cap— Barry Silbert (@barrysilbert) May 27, 2020
Adam Back, Co-Founder and CEO of Blockstream:
$GS aren't the smart money for a few more years: they don't get #bitcoin digital scarcity, censor resistant asset class. With GBTC buying out 2/3rd of block reward, too early for followers. Good time for bitcoiners to stack sats, accumulate $BTC positions https://t.co/sAyjVFzDl6— Adam Back (@adam3us) May 27, 2020
Global macro investor Dan Tapiero:
Goldman Sachs does not make fees when a client buys #bitcoin— Dan Tapiero (@DTAPCAP) May 27, 2020
Buying Btc is an implicit rejection of buying assets that Goldman Sachs sells upon which they make fees
Buying btc is a rejection of the worldview they sell upon which they make fees.
Long PTJ/Short GS
EVERY TIME pic.twitter.com/AIaiRojpeO
It is interesting to note that Goldman Sachs' market cap is currently $72.10 billion, while Bicoin's market cap is (as of 11:32 UTC on May 28) $169.62 billion.
Also, as you can see in the two price charts below (from Google Finance and CryptoCompare respectively), in the year-to-date period, Goldman Sachs stock (NYSE: GS) is down 10.52% while the price of Bitcoin is up 28.40% against USD: