Last 12 months’s havoc within the cryptocurrencies space has allowed for a “flight to quality” amongst crypto investors, Mathew McDermott, Goldman Sachs’ global head of digital assets, said on CNBC’s “Crypto World” on Friday.
“We do have a crypto trading desk on the firm,” he said, noting that the bank only trades cash-settled derivatives, options and futures.
Cryptocurrencies suffered during 2022 as investors steered clear of risk assets. Bitcoin tanked greater than 60% last 12 months. The collapse of crypto exchange FTX, together with a washout amongst other crypto-related corporations, also raised concerns on whether federal agencies have to step in and regulate the industry.
Since then, large investors who proceed to take part in the space have change into more discerning.
“What we’ve seen more of our larger clients desirous to onboard and trade with what they probably perceive to be a lot better regulated and capitalized entities,” McDermott added, noting that this has been a byproduct of last 12 months.
Three key areas
Speaking with CNBC’s “Crypto World,” McDermott pointed to the bank’s three key areas of focus in crypto: tokenization, remaking the plumbing of economic markets and the “profound” effect that digital money could have across markets.
“The thrill from our side is … seeing how this technology can impact many alternative parts of the economic system and have an actual business impact,” he added. “We’re at such an early stage when it comes to its adoption, but as you look across the marketplace and also you see the breadth of economic institutions constructing out their digital asset teams, their digital asset strategies, be that the sell side or the buy side, it’s just super exciting and I feel there is a real recognition there.”Â
Collaborating with two other banks, Goldman Sachs launched a tokenization platform that processed a $100 million dollar eurobond from the European Investment Bank.Â
“Considered one of the things from my perspective that is type of been quite necessary is de facto demonstrating that we will apply the technology across all of the geographies,” McDermott said. “We have done something in Europe and as we proceed to construct out, we’re very desirous to try this more broadly across the globe.”Â
CNBC was first to report in November that Goldman Sachs also collaborated with crypto data firm Coin Metrics and financial firm MSCI to create a recent classification system called Datonomy, which McDermott said essentially provides a framework for investment into the brand new asset class.Â
“This we felt was a very necessary type of feature for the market,” McDermott said, describing Datonomy.Â
“We wanted to supply something to the clients that gave them the tools to type of higher analyze, and particularly those that want to type of take into consideration investing, just give them that skill set, or actually the small print to enable them to do it in a more intelligent way,” he said.
A silver lining from 2022’s havoc
FTX’s collapse in late 2022 and the domino effect that worn out other crypto corporations, contributed to traditional financial institutions, like Goldman, being presented with “more sensible” valuations for potential investment within the technology that underpins crypto, in line with McDermott.
“There’s been this precipitous fall within the valuation of many corporations related to the crypto marketplace,” McDermott said. “But really the realm that we have been focused on, blockchain infrastructure, we have continued to see some really interesting opportunities in businesses which are well managed.”
McDermott noted that Goldman Sachs has made investments within the digital asset space, predominantly specializing in blockchain infrastructure and that the bank is “seeing some interesting opportunities there of valuations that just look far more sensible.”
Goldman Sachs has 11 crypto businesses in its portfolio, including Coin Metrics, infrastructure firm Blockdaemon and the bank’s most up-to-date investment TRM Labs.
