Goldman Sachs, one of the largest American investment banks has recently stated that bitcoin and other cryptocurrencies are not appropriate as an asset class. The bank made this allegation during its recent client-facing call on the state of the economy, gold, and bitcoin. The event was hosted by the bank’s Investment Strategy Group which advices them on asset allocations.
The bank does not regard bitcoin or any cryptocurrency as a worthwhile investment for its clients under the current economic environment. According to the bank’s analysts, cryptocurrencies are not able to generate positive cash flow like bonds. The analysts claim cryptocurrencies do not dampen volatility nor provide diversification. They are not also convinced that cryptocurrencies are able to hedge their investors against inflation.
The bank further noted that some of the cryptocurrencies may also be securities. However, it claims a security whose appreciation is primarily dependant on whether someone else is willing to buy at a higher price is not a suitable investment for its clients.
Apart from denying that bitcoin and the other cryptos are an asset class, the bank also called attention to their illicit use cases such as money laundering, Ponzi schemes, terrorist funding, and darknet markets.
Sharmin Mossavar-Rahmani, Chief Investment Officer for Wealth Management at Goldman Sachs said during the call that while some hedge funds are trading bitcoin to take advantage of its high volatility, the bank does not recommend bitcoin for its clients’ investment portfolios.
This news comes few weeks after Paul Tudor Jones, a hedge fund heavyweight had announced that he has allocated almost 2% of his portfolio to bitcoin to hedge against the weakening cash. However, Goldman Sachs Wealth Management Team seems to be taking the opposite side by presenting bitcoin in a negative light to its clients.