As Bitcoin soared to new highs in the past year, many people are considering whether they should invest in the market. However, recently, the Goldman Sachs ISG team has warned that for most investors, it makes no sense to allocate digital currencies in their portfolios.

In a new report to private wealth management clients, Goldman Sachs pointed out that Bitcoin and other cryptocurrencies failed to meet investment standards. The team stated:

“Although the digital asset ecosystem is extremely dramatic and may even completely change the future of the financial market, this does not mean that cryptocurrency is an investable asset class.”

The Goldman Sachs ISG team pointed out that to determine whether an asset investment is reliable, at least three of the following five criteria must be met:

1) Stable and reliable cash flow based on contracts, such as bonds

2) Generate income through exposure to economic growth, such as stocks;

3) It can provide stable and reliable diversified income for the investment portfolio;

4) Reduce the volatility of the investment portfolio;

5) As a stable and reliable value store for hedging inflation or deflation

However, Bitcoin does not meet any of the above indicators. The team pointed out that cryptocurrency gains are sometimes unsatisfactory.

Based on Bitcoin’s “risk, return and uncertainty characteristics”, Goldman Sachs calculated that in a medium-risk investment portfolio, 1% of the cryptocurrency investment allocation corresponds to a return rate of at least 165% to be valuable, and 2% The configuration requires an annual rate of return of 365%. But in the past seven years, Bitcoin’s annualized rate of return was only 69%.

For typical investors who lack assets or portfolio strategies and cannot withstand volatility, cryptocurrencies do not make much sense. The ISG team wrote that they are also unlikely to become a strategic asset class for consumers and private wealth clients.

Just a few months ago, the transaction price of Bitcoin was as high as 60,000 US dollars, but the market has been very sluggish recently. Although the number of Bitcoin transactions has increased recently, this means that the total market value loss is much greater. Goldman Sachs stated:

“Some investors bought Bitcoin at the highest price in April 2021, and some investors sold it at a low price in late May, so some of the value has actually evaporated.”

Goldman Sachs pointed out that another concern is the security of cryptocurrencies. There have been cases in the past where investors’ trading keys were stolen so that cryptocurrencies could not be withdrawn. In the traditional financial system, hackers and cyber attacks also exist, but investors have more recourse. In the encrypted market, once the key is stolen, investors cannot seek help from the central agency to recover assets. In other words, cryptocurrency is not completely controlled by investors.

The report comes as Goldman Sachs is expanding its cryptocurrency products to institutional customers. Earlier this year, Goldman Sachs’ investment bank launched a cryptocurrency trading unit focused on Bitcoin. According to Bloomberg, the bank will provide customers with other options and futures services in the coming months.

17#KDA# #BTC#

 


Post time: Jun-18-2021