Following the failure of the FTX exchange, which hurt valuations and reduced investor interest, Goldman Sachs (GS.N) announced plans to allocate tens of millions of dollars to acquire or invest in cryptocurrency businesses.
As per Mathew McDermott, head of digital assets at Goldman, the collapse of FTX has increased the demand for more dependable, regulated cryptocurrency operators, and big banks see a chance to enter the business.
He continued without providing more information, “Goldman is conducting thorough research of several other crypto businesses.”
McDermott added some truly intriguing prospects are available at much more reasonable prices.
After its abrupt collapse on Nov. 11, FTX applied for Chapter 11 bankruptcy shelter in the US, raising concerns about contagion and escalating calls for stronger regulation of the cryptocurrency industry.
There is no question that it has negatively affected the market’s attitude, according to McDermott. They emphasised that FTX was the ecosystem’s poster child in several areas. But once more, the fundamental technology is still functional.
Even while Goldman’s possible investment is modest compared to the Wall Street giant’s $21.6 billion revenue last year, it is clear from its desire to continue spending that it sees a long-term possibility.
While he considers cryptocurrencies to be “extremely speculative,” its CEO David Solomon had said on Nov. 10 while the FTX crisis was playing out that the underlying technology had great potential if its infrastructure is becoming more institutionalised.
Rivals are less certain.
James Gorman, CEO of Morgan Stanley (MS.N), claimed it is difficult to assign an intrinsic value to it even if it is unlikely to be a fad or disappear.
Noel Quinn, CEO of HSBC (HSBA.L), stated last week at a banking conference held in London that he had no ambitions to grow into retail client crypto trading or investing.
11 digital asset opportunists that extend services including bitcoin data, compliance, and blockchain administration have welcomed investment from Goldman.
McDermott, a triathlete in his free time, had crossed with Goldman in 2005 and worked his way up to director of cross-asset financing before taking over the company’s digital assets division.
His team now numbers more than 70 individuals, including a trading desk for cryptocurrency derivatives and options with a staff of seven.
The data service Datonomy, developed by Goldman Sachs in collaboration with MSCI & Coin Metrics, aims to categorise digital assets according to their intended purpose.
McDermott believed the company is also developing its own proprietary distributed ledger technology.
According to the data website CoinMarketCap, the market for cryptocurrencies crested at $2.9 trillion in late 2021, but has since lost around $2 trillion due to credit tightening by central banks and a wave of high-profile corporate failures. On December 5, it was last seen at $865 billion.
McDermott also added that the fallout from FTX’s bankruptcy increased Goldman’s trading volumes as investors sought to transact with regulated and adequately financed counterparties.
The number of banking institutions looking to trade has surged. said he. Although it’s rumoured that some of them exchanged with FTX, it’s tough to say for sure.
McDermott stated Goldman also sees hiring opportunities as cryptocurrency and tech companies lay off employees, but the bank is currently OK with the size of its workforce.
Others see the cryptocurrency collapse as an opportunity to expand their enterprises.
CEO Mark Bruce revealed Britannia Financial Group is developing its cryptocurrency-related services.
Bruce further elaborated saying the London-based business caters to clients that are ready to expand into digital currencies but have never done so previously.
It will also serve investors who are well-versed in the assets but are hesitant to store money at cryptocurrency exchanges as a result of FTX’s demise.
Britannia is requesting further licences to offer cryptocurrency services, such as brokering transactions for affluent people.
Since FTX’s downfall, more client interest has been observed, he claimed. Customers are searching for more dependable counterparties because some of the younger companies in the sector that specialise in crypto have lost their trust.