Goldman Sachs plans to spend tens of millions of dollars buying or investing in crypto companies after the collapse of the FTX exchange hit valuations and sapped investor interest.
Mathew McDermott, head of digital assets at Goldman Sachs, told Reuters that the implosion of FTX had intensified the need for more trusted and regulated cryptocurrency players, and that the big banks saw an opportunity to pick up the business.
He added that Goldman Sachs is conducting due diligence on a number of different crypto companies, but gave no details.
“We do see some very interesting opportunities that are more reasonably priced,” McDermott said in an interview last month.
FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after a precipitous crash, sparking fears of contagion and amplifying calls for more cryptocurrency regulation.
“In terms of sentiment, it’s going to set the market back, there’s no doubt about it,” McDermott said. “FTX is typical of many parts of the ecosystem. But to reiterate, the underlying technology continues to function. “
While the amount of Goldman Sachs likely to invest is modest for the Wall Street giant, which made $21.6 billion (Rs 178,129 crore) last year, its willingness to keep investing amid the industry turmoil suggests it senses a long term opportunity.
Its CEO, David Solomon, told CNBC on Nov. 10 that while he sees the cryptocurrency as “highly speculative” as the FTX drama unfolds, he sees an underlying crisis as its infrastructure becomes more formalized. The great potential of technology.
Competitors are more skeptical.
Meanwhile, HSBC CEO Noel Quinn told a banking conference in London last week that he has no plans to expand into crypto trading or investing for retail clients.
Goldman Sachs has invested in 11 digital asset companies that provide services such as compliance, encrypted data and blockchain management.
McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to its digital assets practice after serving as head of cross-asset financing.
His team has grown to over 70 people, including a team of 7 strong cryptocurrency options and derivatives trading desks.
Goldman Sachs has also launched data service data with MSCI and Coin Metrics, which aims to classify digital assets according to how they are used.
The company is also building out its own private distributed ledger technology, McDermott said.
According to data site CoinMarketCap, the global cryptocurrency market peaked at $2.9 trillion (roughly Rs. 23,907,000 crore) by the end of 2021, but has shrunk by about $2 trillion (roughly Rs. 16,496,900 crore) this year as banks tighten. credit, a string of high-profile business failures. It was last at $865 billion (roughly Rs. 71 billion) on December 5.
McDermott said the knock-on effects of the FTX debacle had boosted trading volumes at Goldman Sachs as investors sought to trade with regulated and well-capitalized counterparties.
“What has increased is the number of financial institutions that want to transact with us,” he said. “I suspect some of them traded with FTX, but I can’t say for sure.”
McDermott said Goldman also sees hiring opportunities for layoffs at crypto and tech firms, although the bank is currently comfortable with the size of its team.
Others also see the cryptocurrency crash as an opportunity to build a business.
Mark Bruce, chief executive of Britannia Financial Group, told Reuters the company is building out its cryptocurrency-related services.
The London-based firm aims to serve clients who desire to diversify into digital currencies but have never done so, Bruce said. It will also cater to investors who are very familiar with the asset but have been nervous about storing money on crypto exchanges since the FTX debacle.
Britannia is applying for more licenses to provide crypto services, such as trading for the wealthy, he said
“Since the demise of FTX, we have seen more interest from clients,” he said. “Clients have lost trust in some of the younger players in the industry that are purely in cryptocurrency and are looking for more trustworthy counterparties.”
© Thomson Reuters 2022