Despite the recent show of interest in Bitcoin recently, the bank still warns its clients against investing in crypto assets.
Investment bank Goldman Sachs stated in a report released earlier this week that despite recent interest in Bitcoin and Ethereum, cryptocurrency is not a “viable investment”.
Many cryptocurrency fanatics believe that Bitcoin can be used as a hedge against inflation because it is scarce, the supply of Bitcoin is limited, while the supply of fiat currencies like the US dollar seems to be unlimited.
Goldman Sachs thinks otherwise. The bank stated in its report, that “digital assets: beauty is not in the eyes of the beholder.” Although some market analysts and investors may consider Bitcoin to be “digital gold”, this in itself has little meaning for Goldman Sachs:
Saying Bitcoin and cryptocurrencies are digital versions of gold does not give Bitcoin and other cryptocurrencies any value, because gold itself is not a consistent or reliable store of value,” the report said, adding that U.S. stocks It is a tool to hedge against inflation.
More importantly, the bank did not initially buy the “digital gold” narrative: “This group strongly disagrees with the view that cryptocurrencies like Bitcoin are digital gold.”
The report pointed out and went on to conclude that he believes that Bitcoin is not a “long-term store of value or investable asset class” for a diversified investment portfolio, but the bank stated that such assets may be “very suitable for speculation.”
The report parallels Bitcoin with Dogecoin, which is the sixth most valuable crypto asset by market capitalization, and agrees with the view that cryptocurrencies like DOGE can be used for “gambling and entertainment” while quoting the words of cryptocurrency trader Scott Melker.
Dogecoin has risen by more than 12,000% last year and is a perfect example of a volatile cryptocurrency. People believe that when influencial people (usually billionaire businessman Elon Musk) pump it on Twitter, though having no intrinsic value its price will change rapidly.
Goldman Sachs pointed out that rapid price changes discourage potential customers. “The rapid appreciation of cryptocurrency prices; the bombardment of Bitcoin, Ethereum and even Dogecoin by the media (and Twitter); and the contrasting views of well-known market participants have confused many of our customers,” it said.
Goldman Sachs, one of the largest investment banks in the world, has recently shown increasing interest in cryptocurrencies. Just last year, the bank criticized Bitcoin, but the company’s CEO David Solomon said in April that he was paying close attention to the cryptocurrency.
The bank announced in March that it would restart its crypto trading desk.
Although the bank’s consumer and wealth management department’s latest report concluded that due to the risks involved, cryptocurrencies like Bitcoin are still “not a viable investment” for a diversified portfolio.
The company cited regulatory risks (such as government bans on transactions), environmental issues, and potential cyberattacks as reasons to avoid investing in cryptocurrencies.
“Based on Bitcoin’s risk/return characteristics, and it does not meet any criteria required to become a strategic asset class in a client’s portfolio, we do not recommend investing in cryptocurrencies as a class of assets,” the report said.