On May 27, Goldman Sachs, one of the largest US investment banks, held an online meeting with investors. The bank's analysts pr...
On May 27, Goldman Sachs, one of the largest US investment banks, held an online meeting with investors. The bank's analysts presented an analysis of the current state of the US economy, problems with inflation and gold quotes, and also tried to convince the conference participants that it is not worth investing in bitcoin, since it and other cryptocurrencies are not an asset class. What the authors of the Goldman Sachs presentation made a mistake and how the crypto market experts reacted to it - we understand the material.
A small number of people received invitations to the Goldman Sachs online event “The Prospects of the US Economy and the Impact of Contemporary Politics on Inflation, Gold and Bitcoin ”. However, the content of the meeting with investors, as well as the key points of the presentation, became known to the public an hour before the start of the online event, and Goldman Sachs was forced to make the slides publicly available on the same day.
Goldman Sachs presentation "Prospects for the US economy and the impact of modern politics on inflation, gold and bitcoin." Source .
The Bitcoin topic is detailed in six of the 35 slides of the presentation, which ends with the following tip:
“We do not recommend Bitcoin either strategically or tactically for clients' investment portfolios. Even considering that volatility can be beneficial for traders looking for the right moment to enter the market. "
Interestingly, during the meeting, the topic of bitcoin was given only five minutes, and the bank's analysts ignored the questions that their investors had.
Goldman Sachs: Bitcoin Doesn't Create Cash Flow
In this case, it is noteworthy that the bank's analysts decided not to take into account the profitability of the first cryptocurrency. So, according to the latest data, if we take the period from April 28, 2013 to the end of May of this year, then bitcoin turned out to be a profitable investment asset in 91.2% of days. Similar estimates were given earlier, and always gave an indicator of more than 90%. Thus, an unfavorable period for investing in bitcoin takes about 10% of the above timeframe.
All other negative theses of the bank about the first cryptocurrency are similarly refuted. So, Goldman Sachs starts by saying that bitcoin and other cryptocurrencies are not an asset class. The arguments of the investment bank analysts boil down to the fact that, unlike bonds that generate income, the rise in the price of bitcoin depends on the presence of investors on the market who are ready to pay a price higher for it than the previous holder of the cryptocurrency.
The well-known bitcoin investor Tyler Winklevoss, who, together with his brother Cameron, has crypto assets worth more than $ 1 billion, did not understand why Goldman Sachs decided to compare bitcoins with bonds, because it is obvious to everyone that these are different things.
Bitcoin "does not create cash flows like bonds." Because he is not. And the sky is blue.
Moreover, today the turnover of government bonds with negative income is approximately $ 15 trillion. And in the Eurozone, such securities (with a total estimate of € 4.5 trillion) account for about 55% of the entire market for such financial instruments. In addition, there are corporate bonds, investments in which also bring losses (in the EU, for example, there are € 71 billion of such bonds).
Tom Masogade, co-owner of the OVEX Digital Asset Exchange, also noted that there are many assets promoted by Goldman Sachs, the price of which depends on the desire of others to buy them at a higher price. Thus, Bitcoin is no different from a number of other traditional financial instruments.
Bitcoin and US dollar
Goldman Sachs' opinion contrasts with what the well-known investor Michael Bloomberg thinks about cryptocurrencies, who believes that " cryptocurrencies are a whole class of assets, and that is why I advocate that there are rules for working with them ."
In its presentation, Goldman Sachs also looked to statistics from past years to show that Bitcoin could have been used in questionable financial transactions. At the same time, analysts cited data for 2019 only on the basis of one source - the New York analytical company Chainalysis, which works under a number of US government contracts. But even if we imagine that the given amount for the entire 2019 ($ 2.8 billion in bitcoins) came to crypto exchanges from dubious sources, then, as Tyler Winklevoss emphasizes , the volume of similar suspicious transactions that are made in the US dollar is at least 365 times higher than bitcoin.
If we take an independent study by Elliptic, then the company's latest report provides other figures regarding the assessment of suspicious transactions with bitcoins: for example, at the end of 2019, this figure was less than 1%, as in 2018.
At the same time, analyst Meltem Demirors recalled that the Goldman Sachs bank itself was involved in a multibillion-dollar scandal. Indeed, at the end of 2019, the Supreme Court of Malaysia began to consider a case against an American investment bank, during which the local investigation accused a number of Goldman Sachs structures of complicity in the misappropriation of funds from the Malaysian Wealth Fund in the amount of $ 6.5 billion.
Goldman Sachs does not recommend gold
Curiously, the Goldman Sachs presentation actually plays into the hands of bitcoin as well. For example, the bank admits that investments in gold do not always provide income above the inflation rate for the US dollar. Thus, Goldman Sachs says that the precious metal gives negative returns at times. And therefore, Goldman Sachs does not recommend investing in gold either.
This is a landmark piece of advice given that in times of crisis, investors need instruments that are rare. And since Goldman Sachs rejects gold, the search begins for assets that are also rare. And bitcoin has such a property - the emission of the first cryptocurrency is limited and cannot exceed 21 million units, which is guaranteed by the consensus algorithm embedded in the blockchain of this cryptocurrency. At the same time, Goldman Sachs analysts said that the emergence of bitcoin hard forks, such as Bitcoin Cash, is affecting the perception of bitcoin as a rare asset. This is not the case: despite various “spin-offs” from the number one cryptocurrency, it continues to dominate the majority of the crypto market in terms of dominance.
Buffett turned his back on Goldman Sachs
In the final slide, there is not a single piece of advice on what to invest in the bank's investors, but it makes a statement that "the US dollar will not lose its role." This brief thesis looks similar to the statements made by US Treasury Secretary Stephen Mnuchin, urging Americans to trust the dollar and banks. Considering that on the largest regulated US crypto exchange Coinbase, with the start of financial aid payments to the population, an increase in the number of transactions was recorded exactly by the amount of government subsidies, Mnuchin's assurances look understandable.
However, in the case of confidence in banks, "the blow came from where you don't expect it": world-famous billionaire Warren Buffett, nine days before the presentation of Goldman Sachs, announced that his Berkshire Hathaway fund had sharply reduced its stake by selling off the securities of the investment bank.
Of course, this is a "black mark" not only for Goldman Sachs, but for the entire US banking sector, the meaning of which is that Buffett does not see an opportunity for American banks to undergo a successful transformation and enter a new digital world, performing all the same functions. ...
How to stay afloat?
Thus, Goldman Sachs' statements about Bitcoin look like an attempt to instruct the Titanic captain to his team: the ship has not yet hit an iceberg, but has been hit by a storm. Moreover, these instructions do not answer the main question: how do you plan to stay afloat? After all, to survive the 2008 crisis, Goldman Sachs was helped by financial assistance from the US government in the amount of $ 34 billion, which is equivalent to half of the current capitalization of Goldman Sachs.
At the same time, financial turbulence shows that the S&P 500 index continues to be in the red as compared to the beginning of the year (-6.2%), despite the liquidity provided by the US Federal Reserve to the stock market. At the same time, Bitcoin, without any injections from the American authorities, demonstrates a profitability of + 32.4% during the same time. The bank's investors, undoubtedly, also remember that at the end of 2019, Bitcoin became the best investment asset.
Goldman Sachs' dislike for bitcoin can be explained by the fact that the bank cannot make money from the fact that its client buys bitcoins. As noted founder of the investment company D-TAP Deng Tepeyro:
“Buying a cryptocurrency is a step towards abandoning the acquisition of those assets that Goldman Sachs sells, receiving commissions from these transactions.”
Perhaps without making any positive recommendations, Goldman Sachs, whose common stock has plummeted 14.5% since the beginning of the year, demonstrates that neither the bank itself nor gold has the same attractiveness for investors that Bitcoin has. Against the backdrop of underwhelming arguments against the first cryptocurrency, it can be said that Goldman Sachs made a great advertisement for it. BTC in five days after the presentation of the bank rose by 7.4%.
