After the failure of the FTX exchange impacted valuations and reduced investor interest, Goldman Sachs plans to spend tens of millions of dollars to purchase or invest in cryptocurrency businesses.
According to Mathew McDermott, head of digital assets at Goldman, the collapse of FTX has increased the demand for more dependable, regulated cryptocurrency players, and big banks see an opportunity to take up business.
Goldman is conducting due diligence on a number of other cryptocurrency companies, he continued, without providing further information.
In an interview last month, McDermott stated, they certainly see some really exciting opportunities, priced much more sensibly.
After its abrupt collapse on Nov. 11, FTX filed for Chapter 11 bankruptcy protection 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. FTX was the ecosystem’s poster child in many areas. But once more, the fundamental technology is still functional.
Even while Goldman’s possible investment is minor 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.
Its CEO, David Solomon, told CNBC on Nov. 10, as the FTX crisis unfolded, that while he considers cryptocurrencies to be “very speculative,” he sees significant potential in the underlying technology if its infrastructure becomes more structured.
Rivals are less certain.
Morgan Stanley CEO James Gorman stated, he doesn’t think it’s a fad or going away, but he can’t put an intrinsic value on it.
Noel Quinn, the CEO of HSBC, stated last week at a banking conference in London that he has no plans to expand into retail customer crypto trading or investing.
11 digital asset businesses that offer services like compliance, cryptocurrency data, and blockchain management have received investment from Goldman.
After working as the head of cross asset financing at Goldman from 2005 to 2007, McDermott—who enjoys triathlons in his spare time—rose to lead the company’s digital assets division.
His team now numbers more than 70 individuals, including a trading desk for crypto options and derivatives with seven members.
Additionally, Goldman Sachs, MSCI, and Coin Metrics have launched the data service datanomy with the goal of categorizing digital assets according to their intended use.
According to McDermott, the company is also developing its own proprietary distributed ledger technology.
THE “TRUSTED” PLAYERS
According to data, the market for cryptocurrencies peaked at $2.9 trillion in late 2021, but has since lost about $2 trillion due to credit tightening by central banks and a wave of high-profile corporate failures. On December 5, it was last at $865 billion.
According to McDermott, the fallout from FTX’s collapse increased Goldman’s trading volume as investors sought to transact with regulated and well-capitalized counterparties.
The number of financial institutions wanting to trade with them has increased, he said. He has a suspicion that some of them traded with FTX, but he can’t say for sure.
According to McDermott, Goldman also sees hiring opportunities as cryptocurrency and tech companies lay off employees, though the bank is currently content with the size of its workforce.
Others see the cryptocurrency collapse as an opportunity to expand their businesses.
According to its CEO Mark Bruce, Britannia Financial Group is developing its cryptocurrency-related services.
According to Bruce, the London-based business caters to clients who are eager to diversify into digital currencies but have never done so before. 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.
According to him, Britannia is requesting additional licenses to offer cryptocurrency services, such as brokering transactions for affluent people.
According to Bruce, the London-based company aims to serve customers who are eager to diversify into digital currencies but have never done so before. It will also cater to investors who are very familiar with the assets but are wary of storing funds at crypto exchanges following the collapse of FTX.
Britannia is applying for additional licenses to provide cryptocurrency services, such as dealing with wealthy individuals, he said.
They have seen more client interest since FTX’s demise, he said. Customers have lost trust in some of the sector’s younger businesses that only do crypto, and they are looking for more trusted counterparties.
