Huge demand from institutions for digital assets is the driving force behind recent surges in cryptocurrency prices, according to Goldman Sachs analysts.
The Fleet Street-based investment firm is currently trying to reinstate its cryptocurrency trading desk following recent clamours for a raft of crypto assets.
The move follows a survey of some 300 of the London firm’s clients which discovered 40% of them have holdings in crypto.
Matt McDermott, Goldman Sachs’ head of digital assets, explained the crypto landscape of 2021 was a very different place to that of 2017, largely because of private banking clients and institutional demand – a feature that was almost entirely absent until recently.
“When we talk about institutional demand, we talk about the whole cross section of the industry sectors,” he said in his latest podcast.
“The team have fielded well over 300 conversations. And when I talk about the broad spectrum, I’m referring to hedge funds, to asset managers, to macro funds, to banks, to corporate treasurers, insurance, and pension funds.”
Mr McDermott also confirmed that much of the interest was purely around the world’s most dominant cryptocurrency – Bitcoin.
“I think it’s pretty fair to say that all of our institutional client discussion is really focused around Bitcoin,” he said.
How can we get exposure?
“Where the questions are not really ‘what is it?’, thankfully, it’s more about how can we get exposure, what are the instruments we can transact, and what is Goldman offering today?”
The senior advisor also expressed some initial surprise at the high proportion of clients in the survey having exposure to cryptocurrency, but quickly understood the figure could rise dramatically.
“What’s been particularly interesting of the respondents, 40 percent of the clients currently have exposure to cryptocurrencies,” he added.
“And that could be through a variety of different mediums – the physical through derivatives, through securities products, or other offerings in the market.
“And so, that seemed actually a little high to me. But I thought that was kind of very reflective of the demand we’ve seen over the last three to six months.
“I thought another interesting stat which really corroborates what we’ve mentioned earlier was that 61 percent of the clients expect their digital asset holdings to increase over the next year.”