Top 10 insights into Goldman Sachs 'June cryptocurrency report

原文标题：《 10 Highlights From Goldman Sachs's June 2021 Digital Asset Thought Piece 》

Originally written by Lou Kerner

原文编译： Bite，火星财经

In its June cryptocurrency report, Digital Assets: Beauty Is Not in the Eye of the Beholder (Digital Assets: "Beauty Is Not in the Eye of the Beholder"), a 60-page discussion of the cryptocurrency ecosystem, discusses the role and balance of cryptocurrencies in a portfolio.

While the authors of the Goldman report believe that blockchain technology is likely to have the same impact in the future as the Internet has had in the past few decades, the future of cryptocurrencies is uncertain.

While there are many disappointments in the Goldman report, I think their views will shift over time, so I recommend crypto investors read the entire report. Given the report's length and the fact that most people won't read it, here are the 10 highlights I found to be worth watching:

Click to download the original:

10 Highlights From Goldman Sachs' June 2021 Digital Asset Thought Piece

1. The Goldman report highlights broad thinking on crypto ecosystems

On one side are the proponents, whose basic premise is that the US government gradually devalues its currency. So the world needs a trusted alternative like Bitcoin.

On the other side are the naysayers, who argue that cryptocurrencies do not have the tangible value identified by traditional valuation methods. Unfortunately, Goldman is very much in the latter camp. The report notes that proponents ignore that the reserve currency status of the dollar is agreed by the world and is backed by a $21 trillion economy.

2.  GOLDMAN SACHS: Of the three roles that Bitcoin allegedly plays in the real world, we don't think any of them have materialized, including a store of value function.

The Goldman Sachs report points out that Bitcoin will initially implement a peer-to-peer payment system, or currency. However, this type of digital currency is too slow and has limited throughput for this purpose. Goldman says bitcoin is too volatile to be a medium of exchange, and that its volatility prevents cryptocurrencies from being a unit of measure for pricing commodities like crude oil.

Most notably, the authors of the report do not consider Bitcoin a suitable long-term store of value, nor do they consider it a diversified portfolio asset class. Interestingly, Goldman Sachs has previously said that gold is not an investable asset class either. Thus, Bitcoin being "digital gold" does not confer any value on the digital currency.

3.  On the Bitcoin blockchain: "The biggest success of Bitcoin is that it has inspired the development of the blockchain, with faster transaction speeds and more powerful functions".

Goldman highlighted Ethereum's ability to decentralize applications (DApps) on the blockchain, where smart contract computer programs are executed. The Goldman Sachs report highlights the following six public chains:

But Goldman didn't go into detail on why those six chains were, while others, such as Cardano, Hedera, Stellar, Casper and Avalanche, were ignored.

The first part of the report (Understanding the Digital Asset Ecosystem: Bitcoin, Blockchain, and Web 3.0) ends with "Use Cases for Blockchain Technology," with only a brief discussion of DEFI.

4. Goldman Sachs: "We believe cryptocurrencies do not add value to clients' portfolios in strategic asset classes."

The Goldman Sachs report describes bitcoin as "the oldest and largest cryptocurrency by market capitalization." Bitcoin was not the first cryptocurrency, as it was studied by various parties before the first bitcoin units were mined in 2009.

The second claim in the report is that Bitcoin is the largest cryptocurrency by market capitalization, according to CoinDesk.

Goldman Sachs focused on this particular digital asset due to its prominent position in the term digital currency, presenting an analysis that cryptocurrencies are not investable assets, and bitcoin does not meet at least three of the following five criteria.

1) Generate stable, reliable cash flow on a contractual basis, like a bond;

2) Like a stock, it generates income through its impact on economic growth;

3) Provide consistent and reliable diversification returns to the portfolio;

4) Reduce volatility;

5) provide reliable and consistent evidence to hedge against inflation or deflation;

According to Goldman's "optimization model", bitcoin would need a 165% annual return, taking into account volatility, risk premium and Sharpe ratio, in order to strategically allocate 1% of a medium-risk portfolio to bitcoin. Since January 2014, Bitcoin has provided a 69 percent annualized return, nowhere near the level Goldman needs to justify its allocation.

To me, this idea is nonsense, and the authors of the Goldman report, lacking much detail, disprove an asset that has performed significantly better than any other in human history.

5. Goldman Sachs: "The argument that Bitcoin is a digital gold and store of value has three major flaws."

First, the Goldman Sachs report disagrees that inflation is inevitable. But even if it does, the authors don't think bitcoin is a good hedge because the data don't support the argument that gold is a good store of value in times of inflation.

Second, bitcoin's price has fallen too often and too far to provide the reassurance that a store of value is supposed to provide.

For gold standard advocates, bitcoin and other cryptocurrencies do not share gold's key attributes, which make it a better store of value than other assets.

This is what makes Goldman Sachs so frustrating to me. The report quotes one gold standard advocate as saying: "Bitcoin's current stated limit of 21 million creates relative scarcity because there are many cryptocurrencies and some are more functional than others." Aren't there many commodities that are functionally superior to gold?

Goldman's report said that "it is highly unlikely that a central bank would purchase bitcoin to replenish its reserves," without offering any reason. Finally, the document points out that Bitcoin does not behave like gold, given its low correlation. Therefore, Bitcoin cannot be a digital gold/store of value. Goldman somehow missed the fact that it did a far better job of "storing value" than gold.

6. Goldman Sachs: "We believe it is almost impossible to establish a credible cryptocurrency valuation framework".

Because it can't be valued, cryptocurrencies are an asset whose appreciation depends largely on the willingness of others to pay more for them, which is not a good place for Goldman's clients to invest.

7.  Goldman Sachs: "It is almost certain, in our view, that the S&P 500 will be in an upward trend over the next decade."

The legendary cryptocurrency OG Wences Casares has long argued that bitcoin is the world's biggest asymmetric bet. He told Goldman Sachs, "Bitcoin has a better than 60 percent chance of succeeding and being worth more than $1 million in less than 10 years; a 25-30 percent chance doesn't go away, but becomes irrelevant (in which case it still has a price, but it's much lower than it is today, Maybe less than $1,000 per bitcoin); 10-15% of the chance disappears and becomes worthless."

Goldman has tried to turn this argument on to bitcoin, making the ludicrous claim that U.S. stocks are almost certain to rise over the next decade.

As proof of this view, Goldman writes: "The S&P 500 has produced positive returns 97 per cent of the time during the 10-year rolling period after the second world war." I'm pretty sure that's what Goldman Sachs told its clients in 2008 about house prices.

8. Goldman Sachs: "Regulation is needed to maintain financial stability and protect ill-informed market participants".

Goldman Sachs says that even cryptocurrency proponents must recognize the importance of the Fed's role as "lender of last resort," but fail to note that the policies used by central banks created high leverage that caused the economy to implode during the Great Financial Crisis.

The report goes on to say that there will inevitably be a credit crunch in the cryptocurrency market, and the lack of a lender of last resort makes it impossible to figure out how to recover.

Finally, the authors astonishingly ignore that this is all a confidence game. Confidence in the Federal Reserve and central banks around the world is also waning.

Goldman Sachs is still too locked in the rear-view mirror to see where cryptocurrencies are headed, and doesn't realize the massive changes that are taking place.

9. Goldman Sachs: "We should not underestimate the impact of increased regulation, particularly from the US".

Goldman makes no mention of the massive regulatory arbitrage going on around the world, where forward-looking countries like Singapore, Switzerland, and even El Salvador are experiencing an influx of capital and engineers that are promoting cryptocurrency innovation, not stifling it.

10.  GOLDMAN SACHS: At some point, ESG proponents may consider moving away from cryptocurrency activities, as energy is wasted in the creation of bitcoin, and even cryptocurrencies are used in illegal activities.

But more importantly, the Goldman report fails to mention crypto's potential to improve the lives of billions of people through simple processes like financial inclusion or identity. For a cryptocurrency supporter like me, it's hard to imagine a world in which cryptocurrencies won't be the greatest safe haven for ESG in human history.

 The original link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia