Friday, March 29

Goldman Sachs Bank Says Widespread Crypto Acceptance Won’t Boost Prices… Quite the Opposite


For DailyBitcoin Editor

Goldman Sachs predicts hodls could be hurt by widespread adoption of cryptocurrencies.

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The bank strategists Goldman Sachs have been, in recent months, quite positive regarding the market. This same month of January, they predicted a price of Bitcoin of USD $100,000, based on the gold market as a store of value.

Now, the bank’s most recent report seems to go down a different line. It is a questioning of those who think they have to do hodl (or save) crypto will be the deal of the century. According to his analysis, this will not necessarily be the case.

as you write Bloomberg, According to bank strategists Zach Pandl and Isabella Rosenberg, investors should be skeptical of the narrative that rising cryptocurrency adoption should translate into higher prices in dollar terms.

More details of the report

As the tokens like Bitcoin gained greater appeal in recent years, their correlation with other macro assets has increased to the point where cryptocurrencies are now at the center of recent rotations between asset classes, the strategists wrote in a note published yesterday. They say that works against cryptocurrencies as an ideal tool for diversification.

The price of Bitcoin appears to be positively correlated with indicators of consumer price risk, such as breakeven inflation and crude oil prices, as well as technology stocks “border”, and a negative correlation with real interest rates and the US dollar, they said.

So, the strategists emphasize that “Widespread adoption can be a double-edged sword. While it may increase valuations, it will also increase correlations with other financial market variables, reducing the diversification benefit of holding the asset class.”

Factors of the current fall

As the Federal Reserve and other central banks have moved to tighten monetary policy in recent months, real rates have risen and the dollar has appreciated greatly. That hurt both digital tokens and high-priced tech stocks., and the overall crypto market capitalization shrunk to around $1.76 trillion, referring to more than $3 trillion of higher prices in November 2021.

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

The comments come as crypto markets show increased correlation with equities, particularly this month, with projections for 2022 not favoring a strong rally, at least initially.

Likewise, other analysts defend the simple mathematical equation of declining supply versus wider adoption as a de facto guarantee of higher prices against fiat currencies in the future.

Sources: Bloomberg, Cointelegraph, archive

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WARNING: This is an informative article. DiarioBitcoin is a means of communication, it does not promote, endorse or recommend any investment in particular. It is worth noting that investments in crypto assets are not regulated in some countries. May not be suitable for retail investors as the full amount invested could be lost. Check the laws of your country before investing.





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