Goldman Sachs Says Adoption Won’t Raise Crypto Prices, Talks Stablecoin Plans
Goldman Sachs warned crypto buyers that the increased adoption of tokens will no longer drive up prices and that macroeconomic factors are now exerting a greater influence on the markets. And the company seems to have tempered its interest in launching a stablecoin.
The crypto price warning came in a memo written by two of the firm’s strategists, Zach Pandl and Isabella Rosenberg, Bloomberg reported.
The duo claimed that recent selling strategies suggested adoption was not influencing prices. They explained that recent crypto selloffs have shown that “widespread adoption can be a double-edged sword.” They explained:
“While [adoption] may increase valuations, it will also likely increase correlations with other financial market variables, thereby reducing the diversification benefit of holding the asset class.
Instead, the authors said, macroeconomic factors and the price movement of conventional macro-assets are likely to influence prices over the long term.
According to them, over time, further development of blockchain technology, including applications in the metaverse, could provide a secular tailwind to the valuations of some digital assets.
“But these assets will not be immune to macroeconomic forces, including central bank monetary tightening,” the authors noted.
Indeed, the price correlation of crypto with other macro-assets, the duo explained, has now increased to the point that crypto “is now at the center of recent rotations between asset classes.”
They pointed to the apparent positive correlation of bitcoin (BTC) prices with “consumer price risk proxies” including “breakeven inflation” and crude oil prices – as well as stocks of “frontier” technology companies. In contrast, they said, there is now a negative correlation between crypto price and real interest rates and USD.
As noted, central banks like the Federal Reserve had decided to tighten monetary policy over the past few months, driving up rates and forcing the price of the US dollar higher — factors that hurt both crypto and tech stocks.
Meanwhile, Goldman Sachs may well become the latest major company to put the brakes on — or at least delay — its so-called “global” stablecoin projects.
After a week that saw Meta (Previously Facebook) has reportedly decided to sell its own stable assets and intellectual property, Bloomberg cited a Goldman Sachs spokeswoman said they had no immediate plans to create a Goldman Sachs coin:
“We continue to see the value of working closely with private institutions looking to create a ubiquitous stablecoin that meets legal and regulatory requirements and has transparent governance.”
The firm did not reveal the identity of these “private establishments”.
Goldman Sachs started talking about its stablecoin plans in 2020 and has already invested in Circlethe creator of the USD coin (USDC), a stablecoin pegged to the dollar.
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