Volatile cryptocurrencies go mainstream as Goldman Sachs declares Bitcoin a new asset class

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Goldman Sachs gave the mercurial cryptocurrency Bitcoin Wall Street credibility by labeling it a “new asset class,” even as the world continues to gauge how seriously to take it.

a close up of a hand holding a coinMathew McDermott, Goldman Sachs’s global head of digital assets, said in research that Bitcoin is “now considered an investible asset” and “has its own idiosyncratic risk, partly because it’s still relatively new and going through an adoption phase.”

“And it doesn’t behave as one would intuitively expect relative to other assets given the analogy to digital gold; to date, it’s tended to be more aligned with risk-on assets,” said McDermott, according to Yahoo Finance. “But clients and beyond are largely treating it as a new asset class, which is notable—it’s not often that we get to witness the emergence of a new asset class.”

Cryptocurrencies were up on Monday after a rough week and weekend. Every single one of the top 25 coins was in the green after the tumult of last week.

 

On May 14, Bitcoin, the largest cryptocurrency by market cap, was valued at nearly $51,400 per coin, but it soon began depreciating in value in the following days. It bottomed out Sunday afternoon at about $31,200 but on Monday rose more than 11% to settle at about $38,000.

Ethereum, the second-largest cryptocurrency, was up more than 22% on Monday and was trading at about $2,400 after plummeting to just over $1,700 the day prior. Ethereum was trading at more than $4,300 earlier this month.

The precipitous decline of Bitcoin, Ethereum, and other cryptocurrencies such as Elon Musk-promoted Dogecoin began when Musk, a billionaire investor who also founded Tesla, announced that his company would stop accepting Bitcoin for vehicle purchases. The sell-off accelerated when the People’s Bank of China issued a statement reiterating that digital tokens can’t be used as a form of payment, adding that they are not real currencies.

On Friday, China caused the coins to take another hit when Chinese Vice Premier Liu He called for the “crackdown on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.”

The Treasury Department also said last week that it will mandate any transfer worth $10,000 or more to be reported to the Internal Revenue Service in an effort to mitigate tax evasion using the virtual coins. Treasury Secretary Janet Yellen has also branded Bitcoin as “inefficient” and said she doesn’t think it will be “widely used as a transaction mechanism.”

Regulation is undoubtedly going to be a big factor in the future of Bitcoin, Ethereum, and other cryptocurrencies, which are sometimes referred to as altcoins. McDermott of Goldman Sachs noted that global regulation will have an effect on prices going forward.

“A key concern is inconsistent regulatory actions around the globe that impede the further development of the crypto space, or the ability of more regulated entities to engage within it. It feels like the regulatory tone has turned more constructive, but I certainly wouldn’t want to be complacent,” he said.

Some investors and experts have been optimistic about the future of the crypto landscape, with Carlyle Group co-founder and investor David Rubenstein recently revealing he has invested in companies that facilitate crypto trading.

“It has its ups and downs, and yesterday was not a good day,” Rubenstein said on CNBC after Bitcoin dropped heavily last Wednesday. “But that’s true of anything that is relatively new, and I don’t think you’re going to see anything like crypto going away and disappearing. It’s here.”

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