The adoption of Bitcoin (BTC) and cryptocurrencies will not necessarily result in their dollar price rising, claims Goldman Sachs.
In a Bloomberg note published on Thursday, the international banking giant claimed that the massive adoption of crypto assets would increase their correlation with other mainstream asset classes.
Goldman: Adoption is a ‘double-edged sword’
Unlike many bitcoin proponents, Goldman was completely impervious to the prospect of cryptocurrencies as a tool for enriching the general population.
“While it may increase valuations, it will also likely increase correlations with other financial market variables, which will reduce the diversification benefit of owning the asset class,” the note said.
The authors, Zach Pandl and Isabella Rosenberg, went on to describe conventional adoption as a “double-edged sword.”
In other words, if bitcoin or cryptocurrencies were more correlated to existing assets, the asymmetric profit margin would be reduced.
The comments come at a time when crypto markets are showing a higher correlation with stock markets, particularly this month, and forecasts for 2022 are not favoring a strong recovery, at least initially.
However, not even Goldman himself has fully subscribed to a narrative that argued in early January that BTC/USD could still hit $100,000, somewhat ironically stealing market share from gold and thus attracting more traditional investors.
Simple supply and demand?
Alternative theories for Bitcoin specifically avoid the notion that correlation outweighs the return of other factors in the future.
The simple mathematical equation of decreasing supply in the face of increasing adoption is defended by analysts as a de facto guarantee of higher prices against fiat currencies in the future.
Bitcoin’s predictable issuance schedule, combined with burgeoning wallet entities, amounts to a phenomenon that continues to play out despite short-term price weakness.
The withdrawal, which began in November, hasn’t dampened enthusiasm among users with larger wallets, they say discover the data of the tracking resource Santiment.