Goldman Sachs has revealed plans to spend millions to invest in or buy cryptocurrency firms following the FTX exchange debacle, which hit valuation and deteriorated investor interest. Goldman Sachs’ Mathew McDermott told Reuters that FTX’s fall intensified the need for more regulated, trustworthy crypto players, and leading banks perceive it as an opportunity to acquire businesses.
He added that Goldman was targeting various cryptocurrency companies – without providing details. In last month’s interview, McDermott said they see lucrative opportunities with reasonable prices. FTX filed for United States Chapter 11 bankruptcy on 11 November following its dramatic fall, triggering contagion fears and intensifying calls for comprehensive cryptocurrency regulation.
McDermott stated that the event deteriorated market sentiment, calling the exchange a poster child in various ecosystem segments. He emphasized that the underlying technology remains in performance.
Though the amount the Wall Street giant may invest could not be massive, Goldman, which earned about $21.6 billion in 2021, investing in a turbulent market shows it recognizes the industry’s longer-term viability. David Solomon, its Chief Executive Officer, told CNBC on 10 November (when FTX’s crisis was unfolding) that while he perceives crypto as massively speculative, he trusts in the underlying technology.
Rivals More Skeptical
James Gorman of Morgan Stanley expressed his skepticism during the Reuters 1 December NEXT conference, stating that he doesn’t think it is a fad or disappearing soon, but questioned the crypto’s intrinsic value. Meanwhile, HSBC exec Noel Quinn told a banking meeting last week in London that he doesn’t plan to explore crypto trading further.
Goldman Sachs has invested in eleven digital asset firms that offer compliance, blockchain management, and crypto data handling services. McDermott joined the banking giant in 2005 before rising to operate its digital asset sector after acting as head of asset financing.
McDermott’s team has expanded to over 70 individuals, including a 7-strong cryptocurrency options & derivatives trading desk. Also, Goldman has partnered with Coin Metrics and MSCI to launch a data service datonomy targeted at classifying virtual assets according to their usage. McDermott stated that the company is building its private distributed ledger.
‘Trustworthy’ Players
Coinmarketcap shows the global crypto market hit $2.9 trillion ATH late last year. However, it lost around $2 trillion in 2022 as central banks resorted to tightening. It hovered at around $865 billion during this publication.
McDermott said that the FTX crisis boosted Goldman Sachs’s trading volumes as market players resorted to well-capitalized and regulated options. He added that most financial institutions wanting to work with them might have traded with FTX.
He added that Goldman saw recruitment opportunities as tech and crypto firms trim staff, though the bank remains contented with its current team size. Meanwhile, others view the crypto crash as an opportunity to build businesses.
For instance, Mark Bruce of Britannia Financial Group told Reuters their business is building crypto-related services. The London-based firm targets to serve clients who want to expand into cryptocurrency (according to Bruce). Also, it will help investors that have interacted with digital assets but fear storing cash at exchanges following FTX’s fall.
He stated that Britannia is working on more certificates to offer cryptocurrency services. Bruce noted that they had seen increased customer interest since FTX’s demise, as market players lost trust in younger businesses dedicated to purely crypto.