Here’s what cemented Bitcoin’s ‘position as an official asset class’

The craze around cryptocurrencies has had many former skeptics announce their change of hearts. Institutions now are openly expressing their interest, not only in Bitcoin, but other altcoins as well. Irrespective of one coin’s specific growth in popularity, however, adoption has also significantly increased in 2021.

The same was the case with respect to blockchain adoption as well, with a Deloitte survey last year observing that over 55% of the respondents believe the tech to be critical to the future.

Goldman Sachs is one of the latest institutions to make such a u-turn, with its recent “then vs now” analysis underlining the evolution of cryptocurrency adoption rates over time.

Last year’s report (May 2020)

A report published the previous year was largely bearish about Bitcoin and other crypto-assets. As per the firm’s slideshow, there were various different reasons why Bitcoin could not be considered an asset class, including its association with illicit activities.

Source: Goldman Sachs

Fast forward to 2021…

In a report titled ‘Crypto: a new asset class?’ the bank studied Bitcoin and the emergence of the larger crypto-market as an asset class, a study exactly contrary to what the firm contended a year ago. Alex Krüger, economist, crypto-trader, and founder of asset management firm Aike Capital shared few screenshots on his social media platform regarding the same.

Needless to say, various experts, including both proponents as well as skeptics, were quick to share their views on the latest report from Goldman Sachs.

Michael Novogratz, founder and CEO of crypto-investment firm Galaxy Digital Holdings, said,

“The mere fact that a critical mass of credible investors and institutions is now engaging with crypto assets has cemented their position as an official asset class.”

Supporting the same cause was Michael Sonnenshein, CEO of Grayscale, who reiterated,

“Institutional investors now generally appreciate that digital assets are here to stay, with investors increasingly attracted to the finite quality of assets like bitcoin—which is verifiably scarce—as a way to hedge against inflation and currency debasement, and to diversify their portfolios in the pursuit of higher risk-adjusted returns.”

Source: Twitter

On the contrary, Nouriel Roubini, an Economics professor at NYU and popular crypto-skeptic, provided a contrasting viewpoint,

“I disagree with the idea that something with no income, utility, or relationship with economic fundamentals can be considered a store of value or an asset at all.”

Curiously, the same report also looked at the utility-based functions of cryptocurrencies, apart from Bitcoin. What this suggests is that for many entities in the mainstream like GS, Bitcoin isn’t the only cryptocurrency to catch their eye. The world’s largest cryptocurrency’s institutional adoption and the larger market’s bull run have both contributed to the scope and width of the latest report from Goldman Sachs.

Alex Kruger Twitter| Goldman Sachs Research