Goldman Sachs predict crypto will usher in a new Data Economy

06/03/2021

The banking giant, Goldman Sachs has released a publication titled “Crypto: A New Asset Class” outlining the crypto technology’s potential to become an institutional asset class.

The Global Head of Commodities Research Jeff Currie discussed the potential for blockchain to change the way information is handled on the Internet. In industries where trust is key, blockchain’s ability to be immutable and public while still protecting privacy gives it a significant edge over frameworks that require trust to function.

Finance, law, and medicine are key areas where smart contracts can change the way information is transferred, Currie noted. The publication also said that Ethereum native smart contract integration could one day help it surpass Bitcoin as the world’s most valuable blockchain.

Currie wrote:

“The most valuable crypto assets will be those that help verify the most critical information in the economy. “A blockchain platform like Ethereum could potentially become a large market for vendors of trusted information, like Amazon is for consumer goods today.”

As more users trust their data to the blockchain, any privacy concerns will disappear as the number of digital profiles grows, giving examples of medical data, personal finances, asset ownership, and intellectual property rights.

Galaxy Digital’s Mike Novogratz shared similar views on Ethereum's future. He said:

“The three biggest moves in the crypto ecosystem—payments, DeFi, and NFTs—are mostly being built on Ethereum, so it’s going to get priced like a network. The more people that use it, the more stuff that gets built on it, and the higher the price will ultimately go.”

The crypto market has suffered a significant downturn in recent weeks. BTC suffered its biggest monthly dip in a decade, while ETH is down over 40% from record highs. Still, Ethereum usage is on the rise.

Goldman Sachs U-Turn

Goldman’s current stand on crypto is in stark contrast with those the bank has held in the past. The institution stated in 2020, that cryptocurrency was “not an asset class.” They argued that Bitcoin was too volatile for institutional and banks to consider it a worthy investment.

Since then Crypto has gone through its biggest bull run, and the bank has changed its stance. It recently outlined its plans to offer Bitcoin products to wealthy clients. The latest report highlights how Bitcoin’s fast-growing global adoption is driven partly by its strong brand and some of the properties that make or break a potential store of value like privacy, security, and transferability. Its digital nature also makes it more appealing to younger generations.

Risk Analysis

According to the publication, the biggest obstacle to global cryptocurrency adoption is a legal crackdown. Blockchains will need to be truly decentralized to appease regulators. If crypto assets are to survive and grow to their fullest potential, they need to define some concept of “sufficiently decentralized” that will satisfy regulators. Otherwise, the technologies will soon run out of uses.

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