Goldman Sachs: Cryptocurrency Adoption Not Enough to Increase Bitcoin Price


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Banking giant Goldman Sachs is contradicting the prevailing saying that increased adoption of cryptocurrencies will contribute to and cause the price of Bitcoin to increase.

Goldman Sachs believes that it will not be enough to increase the price of Bitcoin.

In a note to investors on Thursday, January 27, Goldman Sachs researchers Zack Bundel and Isabella Rosenberg wrote that while Bitcoin is gaining traction, its correlation with other macro assets is also on the rise.

Strong liquidations in bitcoin and cryptocurrencies often follow liquidations in the stock market.

According to Bloomberg data, Bitcoin’s correlation with the S&P 500 has reached an all-time high.

Positive correlation between Bitcoin and other assets:

The report shows that the price of Bitcoin was positively correlated with some technical stocks and crude oil prices, in addition to being affected by consumer price risks such as inflation.

On the other hand, Goldman notes that Bitcoin is negatively correlated with the dollar and real estate, and from the report also:

Recent crypto sales confirm that mainstream adoption can be a double-edged sword.

While it can raise valuations, it is also likely to raise relationships with other financial market variables, reducing the benefits of diversification for holding a new asset class.

The recent decline in the cryptocurrency market was due to the Federal Reserve’s hint that interest rates will rise in the future this year due to high inflation.

Strategists at Goldman Sachs added:

Over time, further development of blockchain technology, including applications in metaverses, may provide a tailwind to valuations for some digital assets.

But these assets will not be immune to macroeconomic forces, including central bank monetary tightening.

Bitcoin and many other altcoins have already corrected more than 50% from their all-time highs.

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