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Goldman Sachs Is Bringing bitcoin-Backed Loans To Traditional Finance

Lending and borrowing have become words that are associated with Bitcoin. This is the same with traditional finance where lending and borrowing remain a big part of the ecosystem. However, there has not been an intersection of these three. This has mostly stemmed from the distrust of traditional finance toward bitcoin. The digital asset which remains largely unregulated did not provide the kind of backing tradfi wanted. That is until now.

Bitcoin-Backed Loans In Tradfi

Investment bank Goldman Sachs has announced the introduction of Bitcoin-backed loans. In what is a first for a major U.S. bank, Goldman Sachs has expanded its crypto offerings to include these bitcoin-backed loans. It is the first secured lending facility of its kind which will lend out cash that is collateralized by BTC. 

Related Reading | Number Of Bitcoin Millionaires On The Rise As Accumulation Continues

Mostly, banks have shied away from the cryptocurrency due to its highly volatile and unregulated nature. Nevertheless, various institutions have taken to providing services that revolve around cryptos such as asset and wealth management, trading, and investment. All of which remains a far cry from cash loans that use bitcoin as collateral.

A move like this will see not only Wall Street embrace the cryptocurrency faster but other factions of the traditional finance will begin to move in this direction. 

BTC succumbs to bears | Source: BTCUSD on TradingView.com

Goldman Sachs has no doubt evolved in its view of bitcoin over time. Less than two years ago, the bank did not believe that the cryptocurrency was an asset class. Since then, it has not only recognized it as an asset class but has been offering its clients a way to trade the cryptocurrency. It also boasts a crypto research team that publishes reports on the crypto market. Over the months, these reports have been mostly bullish toward digital assets such as Bitcoin and Ethereum.

Crypto Collaterals

Although this is the first for a major bank to accept bitcoin as collateral for a loan, it is in no way a novel concept. The rise of the decentralized finance (DeFi) space has seen users being able to borrow against their crypto holdings for a long time. There are DeFi protocols dedicated to this in the space.

Related Reading | Bitcoin Briefly Tops $40,000 As More Countries Adopt Crypto

In this regard, traditional finance is playing catch-up to DeFi which requires no paperwork for individuals to secure a loan. With a deal like the one Goldman Sachs is offering, it can help to bridge the gap between traditional and decentralized finance.

Bitcoin is trading at $38,927 at the time of this writing, down 2.64% in the last 24 hours.

Featured image from Bitcoin Lending, chart from TradingView.com

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Goldman Sachs: Mainstream Adoption Won’t Boost Bitcoin Price

Goldman Sachs’s words have been interpreted as a sign that the cryptocurrency craze may be coming to an end. The analysts at this global banking powerhouse say they don’t see mainstream adoption boosting the crypto industry soon. Unfortunately, that means bad news for those who bought bitcoin or other crypto assets on hope chests full-force optimism about its value increases exponentially over time.

Cryptocurrencies are becoming more and more popular as the adoption rate for Bitcoin increases. The strategists tell Bloomberg that correlation has started to occur with other macro assets such as crude oil, technology stocks, US dollar – all of which have seen significant growth recently too.

Diverse asset classes have often been seen as a way to diversify your investments. However, according to analysts, this may not be true for crypto assets due to their high correlation with traditional markets. Making them uniquely susceptible during economic downturns or periods where there’s investor panic on exchanges like Binance losing half its value within months.

“Mainstream adoption can be a double-edged sword. While it can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class.”

The Decline In Crypto Industry

Cryptocurrencies have been on a steady decline since November. The market capitalization of all crypto has dropped from $2.8 trillion at its peak in November to just $1.68 trillion now as I write these words. Analysts point out how correlations with stocks or strength USD often influences prices, but what about wider? Is there anything else going through these declined markets besides traditional economic factors like interest rates & business profits?

Related Reading | Which Cryptocurrencies Suffered The Worse Collapse Since All-Time Highs?

Crypto Market Capital disintegrates to $1.68 trillion. Source: Tradingview.com

What might be causing such dramatic price fluctuations across different cryptography currencies- both rise and fall. The blame doesn’t lie solely on one side, though; many factors are driving up or down prices. Those include government regulations abroad where most blockchain technologies operate (such as China and Russia).

Whether blockchain technology can escape from macroeconomic influence and monetary policy is still an open question.

Goldman says;

“Over time, further development of blockchain technology, including applications in the metaverse, may provide a secular tailwind to valuations for certain digital assets. But these assets will not be immune to macroeconomic forces, including central bank monetary tightening.”

Featured image from Pixabay, chart from TradingView.com

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Goldman Sachs CEO Sidesteps Bitcoin Inquiries, Says Blockchain Is More Important

Goldman Sachs has taken many stances on bitcoin and cryptocurrencies at large in the past, even going as far as providing trading services to its wealthier clients. However, CEO David Solomon does not seem as keen on the digital asset. In a recent interview on CNBC’s SquawkBox, the CEO sidesteps questions regarding bitcoin and his views on it.

Goldman Sachs CEO Doesn’t Own Bitcoin

David Solomon sat down with CNBC where the CEO shared his thoughts regarding the cryptocurrencies that are shaking up the investing space. When asked if he owned any Bitcoin or Ethereum, Solomon revealed that he did not hold either of these digital aspects, despite Goldman Sachs offering clients exposure to the market.

Related Reading | Bitcoin Open Interest Takes Second Largest Dump Of 2021

The CEO explained that bitcoin has not really been on his radar nor did he know anything about the digital asset. “My view on bitcoin, for example, is that I really don’t know, but it’s really now something individually that’s important to me,” the CEO explained.

Goldman Sachs had jumped on the crypto train back in May after offering investors access to non-deliverable forwards (NDFs). The firm has begun offering bitcoin NDFs at this time and then added Ethereum in June to provide wider coverage for its investors. Later that month, Goldman Sachs partnered with investment firm Galaxy Digital to trade Bitcoin Futures.

When asked if he wants Goldman Sachs clients to go into crypto, Solomon gave an obvious yet evasive answer. He explains that he wants the clients to do what they want. The CEO also added that some Goldman Sachs clients already participate in the space.

BTC  drops to $48K | Source: BTCUSD on TradingView.com
Blockchain Is More Important

Despite the CEO not owning cryptocurrencies himself, the technology associated with the space has not escaped his radar. Instead of bitcoin, the Goldman Sachs CEO said he was rather interested in the digital payments space, mainly how blockchain technology can be beneficial to this space.

“I’m a big believer in the digitalization that is occurring, the disruption that is occurring, in the way financial services are delivered both for individuals and for institutions,” Solomon said.

Related Reading | Despite Red Bitcoin, On-Chain Signals Flip Green

As for its reach, he added that this is a massive shift and Goldman Sachs is already trying to get in on it. Additionally, Solomon adds that bitcoin is not the key thing in this scenario. Rather the focus should be on how blockchain can aid in accelerating digitalization in the financial services sector. “I think that’s a big opportunity and we’re excited about that,” said the CEO.

Blockchain technology has already managed to penetrate most industries, with the financial services industry being the most obvious one. Megabanks like JPMorgan and Morgan Stanley have all moved to expand their offerings to clients in the space.

Featured image from CNBC, chart from TradingView.com

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Goldman Sachs Analysts Shoot For Ethereum At $8,000 With Expected 80% Rally

Ethereum recently hit a new all-time high following a tremendous bull run alongside top crypto bitcoin. The altcoin has enjoyed glowing success as the market turns to the upside in terms of sentiment. This has helped push ETH and countless altcoins towards new highs in the market. Expectations have been on the rise following this success and Goldman Sachs market analysts believe there are merits to the expectations.

Ethereum’s rally towards $4,400 has set it on a path for even greater value. Faith in the asset has been on the rise in the past few months despite the slow month of September. This has caused an influx of both retail and institutional investors into the digital asset, who are investing for the long-term rather than chasing short-term gains. The push towards ETH at $10K continues and market analysts are marking a path that could lead the market there.

Related Reading | MicroStrategy Bent On Increasing Bitcoin Bet After 9,000 BTC Purchase, Says CEO

Gearing Up For $8,000

Market analysts at Goldman Sachs have said Ethereum’s price movements in line with inflation if continued, may place the asset in position for another upward rally. Goldman Sachs Global Markets Managing Director Bernhard Rzymelka circulated a note that outlined the correlation of ETH’s price movements with inflation breakevens for the past two years.

Inflation has been one of the driving forces behind the adoption of crypto in recent times. As countries shut down due to the pandemic in 2020, inflation rates around the globe shot up as nations could no longer carry out trade with one another. This has persisted into 2021 with inflation rates for the United States at 4.2%. As such, investors have had to find better ways than traditional investment options to hedge against growing inflation and digital currencies as Ethereum has presented as an option.

ETH price drops from ATH | Source: ETHUSD on TradingView.com

Goldman Sachs market analysts put forward that if ETH continues to follow the same line, then the digital asset will rally 80% towards $8,000. However, the analysts explained that this could go either way. Investors’ views of current inflation pressures may persist and if they do, it could be “a sign of exhaustion and peaking, or a starting point of an accelerating rally upon a break higher,” the note said.

Ethereum Trending Higher

Ethereum had trended downwards after losing its footing above $4,400. Bulls had hoped to settle the digital asset above the $4,500 but market momentum dropping during the weekend has seen ETH register lower than expected in the early hours of Monday. This had however not deterred the bulls as the asset is poised to begin another rally to once again test the $4,400 price point.

Related Reading | New Ethereum-to-Cardano Bridge Will Provide NFT Creators Eco-friendly Options

The recently completely Altair upgrade had brought more interest into the asset. With this upgrade, ETH is one step closer to becoming a deflationary asset, a turnaround expected to trigger a surge in the price of the asset once the coins become more scarce.

Although indicators point to more bullish movement, a fall below the $4,300 resistance point will drag the asset farther down. This could see the asset touch back down towards $4,000 again. However, major resistance to this downside will come at $4,150.

Featured image from Coingape, chart from TradingView.com