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 dampened investor interest.
FTX’s boom has fueled the need for more reliable, regulated cryptocurrency players, and big banks are seeing an opportunity to jump in, Goldman’s head of digital assets Matthew McDermott told Reuters.
Goldman is conducting due diligence on a number of different crypto firms, he added, without elaborating.
“We’re seeing some interesting opportunities that are very reasonably priced,” McDermott said in an interview last month.
FTX filed for Chapter 11 bankruptcy protection in the US on November 11 following a dramatic crisis that sparked fears of contagion and heightened calls for more crypto regulation.
“It’s definitely brought the market back in terms of sentiment, there’s no question about that,” McDermott said. “FTX was the poster child in many parts of the ecosystem. But again, the underlying technology continues to work. “
While Goldman’s potential investment isn’t huge for the Wall Street giant, which generated $21.6 billion in revenue last year, its willingness to keep investing amid sector shake-up suggests it sees a long-term opportunity. shows.
Its CEO, David Solomon, told CNBC on Nov. 10 as the FTX drama unfolded that while he considers cryptocurrencies to be “very speculative,” he sees great opportunities in the underlying technology as its infrastructure becomes more formalized.
Opponents are more suspicious.
“I don’t think it’s a fad or gone, but I can’t put an intrinsic value on it,” Morgan Stanley CEO James Gorman told Reuters’ NEXT conference on Dec. 1.
HSBC CEO Noel Quinn said at a banking conference in London last week that he has no plans to expand crypto trading or invest for retail clients.
Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.
McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to lead its digital assets business after serving as head of mutual-asset financing.
Its team has grown to over 70 people, including seven strong crypto options and derivatives trading desks.
Goldman Sachs also launched Datanomy, a data service aimed at classifying digital assets based on how they are used, together with MSCI and Coin Metrics.
The firm is also building its own private distributed ledger technology, McDermott said.
“Trust” players
According to data site CoinMarketCap, the global cryptocurrency market was worth $2.9 trillion at the end of 2021, but lost nearly $2 trillion this year as central banks tightened credit and corporate defaults. Last time it was 865 billion dollars on December 5.
McDermott said the ripple effect of the FTX collapse boosted Goldman’s trading volume as investors sought to trade with regulated and well-capitalized counterparties.
“The number of financial institutions that want to do business with us has increased,” he said. “I think some of them traded FTX, but I can’t say for sure with cast iron.”
McDermott said Goldman also sees hiring opportunities when crypto and tech companies lay off employees, though the bank is comfortable with the size of its team for now.
Others also see cryptocurrency as an opportunity to build their businesses.
Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.
The London-based company aims to serve customers who want to diversify into digital currencies but have never done so before, Bruce said. It also helps investors who are familiar with the asset but nervous about keeping funds in crypto exchanges after the FTX crash.
Britain is applying for more licenses to provide crypto services, such as dealing with wealthy individuals, he said.
“We’ve seen more customer interest since FTX went away,” he said. “Customers have lost faith in some of the younger businesses in the crypto-only sector and are looking for more reliable counterparties.”
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