- Goldman Sachs said that Bitcoin is “not an asset class”.
- In a leaked slideshow the firm said cryptocurrencies are a “conduit for illicit activity,” noting that they are used for money laundering.
- Industry insiders took to Twitter disparaging the investment bank’s claims.
Investment bank Goldman Sachs is not a fan of Bitcoin or any cryptocurrency for that matter.
In a slideshow leaked online titled “US Economic Outlook & Implications of Current Policies for Inflation, Gold, and Bitcoin,” the bank wrote about the potential business opportunities post COVID-19. This slideshow was then discussed on an investor and client call.
With comprehensive insight on crypto and its role, the report said that while bitcoin has amassed “enormous attention”, it cannot be categorized as an asset because they do not generate cash flow like bonds and “do not show evidence of hedging inflation.”
“We 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,” the firm wrote.
“We 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.”
The slides listed various reasons detailing that they are a “conduit for illegal activity,” money laundering, Ponzi schemes, and ransomware.
“Despite that most cryptocurrency ledgers are permanent and auditable public records, cryptocurrencies nevertheless abet illicit activities such as Ponzi schemes, ransomware, money laundering and darknet markets,” the slides said.
Crypto community on Twitter are far from happy
This report then forced the crypto community to strike back and defend the digital currency with some even taking digs at the bank’s claims.
Meanwhile, Tyler threw some shade and invited Goldman Sachs and its employees to a webinar hosted by Gemini explaining the working of bitcoin.
He also called out the firm’s own past practices. He said:
“Fun Fact: Goldman Sachs facilitated $6 billion in money laundering via 1MDB scandal between 2012-13. Double standard much?”
In another post, Tyler said the firm is against digital assets only because they are threatened by its power.
“Goldman Sachs: We do not recommend bitcoin on a strategic or tactical basis for clients’ investment portfolios… Google Translate: We don’t want our clients to buy bitcoin and realize they don’t need us anymore,” he posted.
Co-founder of DTAP Capital Dan Tapiero responded to the slides by saying that Goldman Sachs’ anti-bitcoin ideology only fuels its own money-making agendas. Dan tweeted:
Elsewhere, founder and CEO of Digital Currency Group Barry Silbert tweeted:
In fact, Crypto educator and YouTuber Ivan Liljeqvist went as far as to suggest the banking company a “loser.”
Furthermore, Tom Masojada, co-founder of OVEX Digital Asset Exchange was hardly convinced by Goldman’s cash flow argument.
“Many investments that Goldman labels as ‘suitable for clients’ do not generate cash flows and are primarily dependent on whether someone is willing to pay a higher price at a later date,” he said on Twitter.
Crypto enthusiasts bullish about Bitcoin’s future
Just a few weeks ago, former Goldman Sachs hedge fund manager Raoul Pal said in an interview that the current unprecedented global economic downturns could result in catapulting Bitcoin as a global reserve currency.
In the aftermath of the crisis caused by Covid-19 Pal said there’s a high probability that a crypto-based financial system will emerge disrupting the conventional method of financial processes.
While Goldman Sachs shares the stance as JP Morgan CEO Jamie Dimon who declared crypto a “fraud,” the latter was quick to support the sector especially after JP Morgan Chase added crypto giant Coinbase as a banking client, as the Wall Street Journal reported. The question lies whether Goldman Sachs will change its position if it faces extensive customer demand.