During a recent interview, Mathew McDermott, head of Digital Assets for Goldman Sachs\u2019 Global Markets Division, talked about Bitcoin.<\/p>\n
His comments came during an interview recorded on March 3 for an episode (titled: \u201cMarkets Update: Cryptocurrency Trading\u201c) of the podcast \u201cExchanges at Goldman Sachs\u201d that was released last Friday (March 5). <\/p>\n
In this article, we look at some highlights from this interesting interview.<\/p>\n
Overall<\/strong> Institutional Interest in Bitcoin<\/strong><\/p>\n \u201cIn terms of kind of institutional demand, we have seen no signs of that abating, and when we talk about institutional demand, we talk about the whole cross section of the industry sectors. The team have fielded well over 300 conversations and when I talk about the broad spectrum, I\u2019m referring to hedge funds, to asset managers, to macro funds, to banks, to corporate treasurers, insurance and pension funds.<\/em><\/p>\n \u201cAnd I think it\u2019s pretty fair to say that all of that institutional client discussion is really focused around Bitcoin, but the questions are not really what is it, thankfully. It\u2019s more about how can we get exposure, what are the instruments we can transact, and what is Goldman offering today\u2026<\/em><\/p>\n \u201cAs you can imagine, the different industry sectors have different perspectives, and are at different stages of their evolution. <\/em><\/p>\n Demand From Corporate Treasurers<\/strong><\/p>\n \u201cThey\u2019re interested in two different aspects. Firstly, should they be invested in Bitcoin on their balance sheet and as they think through that, the key drivers from their perspective are negative rates, if they\u2019ve got cash here on deposit where negative rates are being applied, and then just the general fears around asset devaluation\u2026 <\/em><\/p>\n \u201cAnd then secondly, they\u2019re also thinking about it particularly in the context of Tesla\u2019s announcement, you know, should we consider it as a payment mechanism.<\/em>\u201c<\/p>\n Demand From Hedge Funds, Macro Funds, and Asset Managers<\/strong><\/p>\n \u201cYeah hedge funds, just taking them first, I mean, yes, they have been active, but I think there\u2019s been a reawakening. So there\u2019s a lot of talk, but we\u2019ve definitely seen a lot more activity across that industry sector over the last three to four months, and then when you look at the macro funds and the asset managers, it\u2019s broadly the same\u2026 that they\u2019ve really started to think through all the different investment pieces, and so from my perspective, talking to those clients, they\u2019re much clearer on why they want to invest\u2026<\/em> <\/p>\n \u201cWhat they\u2019re interested in is broader market behavior and really identifying what are the most efficient ways for them to get exposure and to think about hedging\u2026 <\/em><\/p>\n Results of Survey of Across Goldman\u2019s Institutional Client Base<\/strong><\/p>\n \u201cWhat\u2019s been particularly interesting of the [early 300] respondents, 40% of the clients currently have exposure to cryptocurrencies. And that could be through a variety of different mediums: the physical, through derivatives, through securities products, or other offerings in the market.<\/em><\/p>\n \u201cAnd so that seemed actually a little high to me, but I thought that was kind of very reflective of the demand we\u2019ve seen over the last three to six months. I thought another interesting stat which really progresses what we mentioned earlier was that 61% of the clients expect their digital asset holdings to increase over the next year. <\/em><\/p>\n \u201cAnd while we\u2019re on this, I think it would be a little remiss of me also not to mention I guess the demand that we see across our wealth management plan base. You know, we see continued appetite both internally and externally through the private bank. So, yes, we see a huge amount of demand institutionally, but we\u2019re also seeing that reflected in the private world management space as well.<\/em>\u201c<\/p>\n How Client Discussions Today Are Different From 2017<\/strong><\/p>\n \u201c2017 was very much a retail-driven market. This time around, as mentioned, we\u2019ve just seen a huge volume of institutional demand across the broad spectrum of different industry types, and as a function, you know, you\u2019re seeing in incumbent banks now explore ways that they can develop products to satisfy that client demand, enabling them to gain exposure to the different cryptocurrencies and also be mindful of what is possible from a regulatory perspective.<\/em><\/p>\n \u201cAt GS, we\u2019re exploring a number of different options to facilitate that demand. And as mentioned earlier in the week in the press, we\u2019re actually going live with our crypto trading desk, which will be quite narrow initially, but we\u2019ll focus on CME futures and on deliverable forwards, and we\u2019re also now disseminating Bitcoin content to our institutional clients through our marquee platform.<\/em>\u201c<\/p>\n Regulatory Obstacles That Are Preventing Goldman From Taking a Bigger Role in Crypto<\/strong><\/p>\n