Goldman Sachs Executive: Cryptocurrency Selloff “Healthy” for the Ecosystem, Custody is the Key to Future Growth

Goldman Sachs Group Inc. has yet to venture into cryptocurrencies, but believes the future of the digital asset class is brighter now that rampant speculation has been weeded out of the market. Justin Schmidt, who heads the bank’s digital asset unit, says the market is healthier today as the focus shifts to institutional-grade service offerings.

Crypto: Far from Dead

The deep correction in cryptocurrency prices, while painful for existing holders, should be viewed positively from the perspective of overall market health, Schmidt said at the annual Consensus conference in New York. The new market dynamics will allow investors to focus on the continued research and development of products and services that could benefit the ecosystem as a whole.

“In many ways, the rampant speculation that has been quelled over the past several months is really healthy for the ecosystem and I very much look forward to companies that are actually providing institutional-grade products and services,” Schmidt said, as quoted by Bloomberg.

Schmidt identified custody as “the foundational piece that is absolutely necessary” for future growth because institutions tend o be much more conservative that institutions tend to be much more conservative about the bank’s ability to hold securities on behalf of investment funds.

He added: “Custody is part of an overall integrated system where different parts need to work well with each other and safely with each other and you have to be able to trust all the different parts in that chain, from buying something to transferring it to storing it in for the long-term.”

Goldman Sachs remains on the outskirts of the cryptocurrency arena after scrapping early plans to launch a bitcoin trading desk. However, the firm was the first to clear bitcoin futures contracts and has dedicated an entire unit, led by Schmidt, to research the space.

Wall Street juggernauts Intercontinental Exchange and Fidelity have already announced plans to launch crypto ventures. Earlier this week, Hacked reported that Nasdaq was also eyeing its very own bitcoin futures product by Q1 2019. It’s apparent that the major institutions are less concerned about the market’s recent performance and are more preoccupied with its future trajectory.

ICE CEO Jeff Sprecher was also present at this week’s Consensus conference, where he expressed unequivocal support for digital currencies and argued that the market’s long-term value was still intact. Kelly Loeffler, the head of ICE’s Bakkt cryptocurrency operation, said bitcoin’s price was immaterial to the platform’s launch early next year.

With respect to bitcoin, Leffler said, “the price is being expressed but there’s a lot of missing infrastructure and use cases.”

Market Eyes Recovery

Since bottoming at $115 billion over the weekend, the cryptocurrency market has recovered more than $21 billion in value, with bitcoin and the major altcoins recording double-digit gains as of Wednesday morning. At the time of writing, the crypto market cap was worth $136.7 billion on trade volumes of more than $18 billion.

Bitcoin has seen sizable gains since bottoming near $3,400. It was last seen trading at $4,675 on Bitfinex. The leading digital currency was trading hands at $4,164 on Coinbase. Aggregate data courtesy of CoinMarketCap shows a 24-hour recovery of 11.5%.

Stellar XLM was also among the biggest gainers Wednesday. A single Lumen was priced at $0.1617 for a gain of 15.4%.

Ethereum’s price recovered more than 11% in lost value to trade at $117.20. Litecoin jumped 13.1% to $33.56, regaining the no. 7 spot in the crypto market rankings. Monero XMR rose 15.4% to $61.72. Tron also added 14% to reach $0.0131.

Bitcoin cash and bitcoin SV lagged behind the broader market. BCH was up 6.3% at $186.29. BSV edged up 2.6% to $100.37.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi