Goldman Sachs Needs Crypto, And It Is Not The Other Way Around

BERLIN (CoinChapter.com) — Goldman Sachs may have been eyeing the crypto market for its next institutional service despite the sector’s extreme losses in 2022. 

Goldman Sachs wants a Takeover Affected Crypto Companies

The banking giant is planning to buy crypto companies and is reportedly doing its due diligence. 

Mathew McDermott, Goldman Sach’s head of digital assets, has pointed out that after the FTX collapse, the need for more regulated and trustworthy cryptocurrency service providers rose. Thus, major banks saw an opportunity to pick up fallen crypto businesses.

Goldman Sachs saw a significant rise in trading volumes after the FTX filed for bankruptcy in November. 

Despite the cryptocurrency sector’s bad reputation, McDermott feels its underlying technology—the blockchain—continues to perform as intended. Notably, in November, FTX disclosed that it has over 100,000 creditors and liabilities in the range of $10 to $50 billion.

However, FTX was not the latest collapse this year. Its predecessors include Tera, an algorithmic stablecoin project that collapsed earlier in May, leading to bankruptcies across the crypto sector. The affected companies include Celcius Network, Three Arrows Capital, and others. 

Goldman Sachs’ earnings per share dropped by nearly 50% year-over-year to $8.25, primarily due to its stock price decline in the said period.

This dent could have caused the banking giant to look into new investment opportunities. And they found crypto, a relatively untapped market, still realizing its potential amid one downturn after another.

However, Goldman Sachs has dabbed into the crypto market before, as it has invested in 11 crypto-related companies that provide blockchain management services, among others. In addition, it was reported last month that the investment bank is cooperating with Coin Metrics and MSCI to create a classification system for digital assets based on their use. 

Call for Strict Crypto Regulations Rise

What was evident from the contagion that brought down the crypto market this year is that it lacks regulation.

Lawmakers globally have committed to change that, with the UK and the US leading the act. 

For instance, UK Prime Minister Rishi Sunak revealed his desire to turn the country into a “crypto hub” by introducing friendly regulations. 

Similarly, the head of the US Commodity Futures Trading Commission (CFTC), Rostin Behnam, appealed to Congress to avoid delaying crypto regulations during his hearing on Dec 1. 

Behnam pointed out that if the lawmakers don’t close the gap, what happened to FTX will continue, putting citizens’ capital at risk of vanishing. 

Meanwhile, some analysts say that the crypto market is close to its bottom. In other words, a “buy zone.”

All the above-stated factors could have contributed to Goldman Sachs’s decision to look into crypto firms as an investment opportunity.