TechCrunch has gotten its hands on a document from Goldman Sachs outlining the company’s early assessment of Bitcoin.
The document contains no surprises. However, some will view it as a shift toward neutrality from some of the negative reviews emanating from Wall Street, such as JPMorgan’s Jamie Dimon’s writing off the cryptocurrency “as a terrible store of value”.
Many in the Bitcoin community will be encouraged by Bitcoin finding grace in Goldman’s eyes to warrant its discussion. Indeed, on Bitcoin’s growing prevalence, the document comments:
“2013 was the year when Bitcoin became a mainstay in mass media, to the extent that it has become hard to separate the effect of hype surrounding the currency from its fundamentals.”
In assessing some of the core risks behind Bitcoin, Goldman writes:
GK Invest Launching a New ProductGo to article >>
“there is no liquid derivative market for Bitcoin; nor a large market of B2B suppliers which companies can use for spending Bitcoin” and reiterates that Amazon has no current plants to accept Bitcoin. Both of these facts point to little traction in the BTC markets for big banks. Without the imprimatur of a big name, Goldman warns, the currency is a bit dangerous to offer to the serious investor.”
For investors interested in gaining exposure to Bitcoin, they can do one of the following: hold the cryptocurrency over time in expectation of its appreciation; mine it; or provide value-add services to participants in the Bitcoin ecosystem for a fee, such as commissions from an exchange.
In further highlighting Bitcoin’s still early stages of development, they actually recommend the latter as the primary approach for profiting off Bitcoin, something which you’ll rarely find in other investments:
“As a full suite of financial services build up around Bitcoin, there will be numerous (mostly commission- based) revenue opportunities investors can focus on, including providing exchanges, wallets, payment processing, lending, derivatives and other services.”
Ultimately, their statement closely resembles those increasingly expressed by governments around the world: it’s a good idea but at this point, a risky investment.
Regardless of their corporate point of view, it has hasn’t kept the investment bank from being connected to the bitcoin sector via former employees such as Coinbase Co-Founder Fred Ehrsam who left his position as an FX trader to join the startup as well as members of the company sitting on boards of bitcoin investment funds. In addition, while not specifically bitcoins, as far back as 2011, Goldman Sachs was speculated to have an interest in virtual currencies when they were tapped by Facebook to lead their IPO.