Crypto community has been eagerly awaiting Goldman Sachs’ client call today in which they were to discuss bitcoin. But it all turned out to be a complete disappointment, as had been expected and not what was hoped.
Godlman’s bitcoin explanation is centered around illegal activity, forks, and exchange hacks.
“Cryptocurrencies Including Bitcoin Are Not an Asset Class,” summarized Goldman.
But as Cameron Winklevoss of crypto exchange Gemini points out, CFTC has already declared bitcoin a commodity over four years back.
Hey Goldman Sachs, 2014 just called and asked for their talking points back.
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.
— Cameron Winklevoss (@winklevoss) May 27, 2020
Interestingly, Goldman also foresaw Bitcoin’s commodity-like financialization as early as 2014. At that time, they also hinted at the potential future price of bitcoin at between $1,000 and $1 million.
Predictable & Unrealistic, Naive & Lazy
Last week, it came into notice that Goldman Sachs will be covering “Implications of Current Policies for Inflation, Gold and Bitcoin” today.
Now, before the call has to go live, the leaked images showed what the investment bank thinks about bitcoin and it’s not pretty or surprising, it’s all the same old, same old.
Goldman still dissing on bitcoin. Don't have to be overly bullish you know, just realistic, and appreciate the assymetry, even with all its flaws.
— Alex (@classicmacro) May 27, 2020
The world’s leading cryptocurrency, according to Goldman Sachs, does not generate cash flow, any earnings, diversification benefits, dampens the volatility, or shows evidence of hedging inflation.
What it does is “abet illicit activities” such as Ponzi schemes, ransomware, money laundering, and darknet markets.
Moreover, “cryptocurrencies as a whole are not a scarce resource,” argues Goldman pointing out the forks BCH and BSV.
What else? It is “susceptible to hacking or inadvertent loss,” Goldman says, mentioning QuardrigaCZ and Parity.
And Oh, it’s “Tulipmania” on steroids. In the year prior to their peaks, while Nasdaq rallied 109% and Tulip prices 485%, Bitcoin and Ethereum rose 2,292% and Ethereum 14,193% respectively.
Bitcoin is antithetical to Goldman’s business model
Goldman Sachs “believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients,” states Goldman.
All of this because Goldman sees Bitcoin as competition and they don’t “gain anything by you buying BTC. No spread, no management fee, nothing,” said trader Cantering Clark. “You buying Bitcoin is antithetical to their business model,” he added. They also,
“believe that while hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale.”
“I guess equities are now off limits?,” is Digital Currency Group founder and CEO Founder/CEO, Barry Silbert’s reaction to Goldman Sachs commentary on Bitcoin.
Dissing Gold Too
During the call, Goldman Sachs covered the macroeconomy where while talking about COVID-19 and GDP/economy risk, they projected Q3 to be a decent opening only to go downhill from there. They believe the “real numbers” for unemployment are far higher but calling it “not a depression.”
While they have zero concerns about inflation or debasing the US Dollar, they are more concerned with deflation. But believes negative interest rates are good for the economy.
“They are aggressively shitting on gold,” shared trader Scott Melker who live-tweeted Goldman’s client call that he was attending.
The precious metal also doesn't offer any “reliable downside protection.”
“Don't listen to what people say, watch what they do”
Not acknowledging the best investment of the last decade which is also outperforming most of the asset classes in 2020 so far doesn't seem like a good call from the bank.
But it’s not like the bank is right all the time. Earlier this year, its analysts called for a $150-$200 price target for oil while it went down below zero last month.
Not to forget that, in mid-2017, the bank saw big declines in part due to bad market calls from its strategists.
The crypto community certainly didn't take it lightly, given that Goldman didn’t even take its time to at least make well-informed and good criticism.
“It’s not that it’s a “bad call” – it’s just naive and lazy. It’s embarrassing,” said Peter Hans of Arca. “There are two types of people in FinServ, those who fear progress and those who embrace it.”
Bank's analysis of #crypto is like the Post office's analysis of email. Ie, they just don't (want to) get it.
— CZ Binance 🔶🔶🔶 (@cz_binance) May 27, 2020
But does it really matter what they say. Jamie Dimon, the CEO of JPMorgan has been calling BTC a “fraud” only to turn around and profess his love for the technology and just this month the bank opened its services for bitcoin exchanges Coinbase and Gemini.
As such, the only take from all of this is, “'Don't listen to what people say, watch what they do.”