Goldman Sachs released a report that reviews bitcoin and other digital assets under consideration for investments. The report named: Digital Assets: Beauty Is Not in the Eye of the Beholder is for their clients.
The report is the fifth insight from a series of reports they have published from 2005. In its report, it has taken digital assets and blockchain as investment opportunities for those who understand it.
The purpose of the report is to provide an objective and balanced view of the role of cryptocurrencies in a portfolio.
It begins with a brief review of the origins and original purpose of Bitcoin and the Bitcoin blockchain. Then it shifts to explain the initial technology and follows with a review of subsequent technological innovations and cryptocurrencies. They also present their views on the impact of this digital asset ecosystem on various businesses. The main focus is on the role of cryptocurrencies as an asset class in a diversified portfolio.
They discuss the basic requirements of an asset class and examine the extent to which cryptocurrencies meet (or do not meet) those requirements. In the end, they conclude with the risks to the cryptocurrency and blockchain ecosystem.
The Report Focuses on Three Sections :
- Understanding the Digital Asset Ecosystem: Bitcoin, Blockchains and Web 3.0
- The Role of Digital Assets in Clients’ Portfolios
- Risks to the Digital Asset Ecosystem
Goldman Sachs reviews on Bitcoin and Blockchain
In the report, it states “ Of the three roles that Bitcoin was purported to play in the real world, we believe that none has materialized.” Hence, they further add that “We also do not believe that Bitcoin is a long term store of value or an investable asset class for diversified portfolios, we do not believe that gold is an investable asset class as a store of value, so claims that Bitcoin is “digital gold” do not confer any value to Bitcoin.”
Bitcoin is also too volatile to be a medium of exchange. Its annualized volatility was 65% over the past 12 months and 71% over the past three months. To put Bitcoin’s volatility in context, the annualized volatility of the S&P 500 Index is 17% for the past 12 months and 15% for the past three months. The volatility of the dollar against a weighted basket of developed market currencies as measured by the DXY Index is 5.5% and 5.6% over the same periods.
In less than 13 years, newer blockchains have been introduced to us. They are reportedly 14,000 times faster when processing transactions than the Bitcoin blockchain. It is likely that blockchain technology will have a high impact in the future as the internet has been over the past several decades.
Also Read: Goldman Sachs Expand in Crypto Trading With a Plan for Ether Options
The report also includes a brief summary of previous insights. These insights from Goldman Sachs compared S&P global with different famous investment opportunities. However, in all these insights Goldman Sachs shows that over the long run S&P is the best investment.
