Goldman Sachs, a renowned Wall Street investment bank, despite avoiding crypto in its reports since 2017, wrote in its 2024 annual report that cryptocurrencies were now a force within the financial markets.
“The growth of electronic trading,” wrote Goldman Sachs, “and the introduction of new products and technologies, including trading and distributed ledger technologies, such as cryptocurrencies and AI technologies, has increased competition.”
The bank did not mention crypto from 2017 to 2023 until this year. There have been many reasons for the bank to consider Bitcoin, from market conditions beating previous highs to the announcement of Bitcoin ETFs and Trump’s pro-crypto administration. Given recent events, it would be difficult for the investment bank to remain silent on crypto.
“We also compete”, wrote Goldman Sachs, “on the basis of the types of financial products and client experiences that we and our competitors offer. In some circumstances, our competitors may offer financial products that we do not offer and that our clients may prefer, including cryptocurrencies and other digital assets that we cannot or may choose not to provide”.
The annual report suggests Goldman Sachs is losing customers to banks that offer more crypto services. The bank has started to invest in crypto assets but remains cautious about digital assets like Bitcoin. In 2021, Goldman Sachs introduced a crypto trading desk; in 2022, it introduced a digital assets platform.
In 2024, Goldman Sachs raised its crypto ETF holdings from $744 million in the third quarter to $2.05 billion in the fourth quarter. The bank also increased its Bitcoin ETF holdings by 15%. The bank has taken an interest in the blockchain industry, being one of the few banks to invest in the Canton network, using blockchain technology to improve financial record keeping.
The 2024 annual report for Goldman Sachs showed positive results with a Return on Equity (ROE) of 12.7%. Earnings per share jumped by 77%. And shareholder return soared by 52%. With a strong annual report, Goldman Sachs offered cautionary words concerning crypto: “Although the prevalence and scope of applications of distributed ledger technology, cryptocurrency, and similar technologies are growing, the technology is nascent and may be vulnerable to cyber-attacks or have other inherent weaknesses.”
However, the Securities and Exchange Commission (SEC) reported that Goldman Sachs has a substantial holding in Bitcoin and Ethereum ETFs, exceeding $1 billion in assets, showing a strong desire by the investment bank to embrace digital assets. This cannot be an accident or some side project because, despite the criticism of crypto, Goldman Sachs has taken a substantial holding in the asset, suggesting that they are taking crypto’s popularity and widespread adoption seriously.
Investors may be more interested in crypto after a large bank like Goldman Sachs makes a substantial investment. The bank is less likely to make impulsive decisions and will hold onto the asset for a longer period, adding to accumulated funds rather than making risky short-term gains. Other institutional buyers may ride the coattails of Goodman Sachs and further deplete the finite amount of Bitcoin in the market, further boosting the prices and promoting crypto amongst the investment community.
Most of Goldman Sachs’s crypto holdings were in Bitcoin and a lesser amount in Ethereum. Most of its Bitcoin holdings are in BlackRock’s iShares Bitcoin Trust (IBIT), with Goldman Sachs owning 24 million shares. The investment includes Fidelity’s Wise Origin Bitcoin Trust (FBTC) and Grayscale Bitcoin Trust (GBTC).
Goldman Sachs’ increased interest in crypto, as evidenced by their mention of the digital asset in their recent annual report, shows a positive trend amongst traditional investors. Bitcoin is often viewed as analogous to gold, a store of value to hedge against market volatility. Ethereum provides access to Decentralized Finance (DeFi) and other blockchain applications. As the market matures and survives short-term bubbles, more and more investors may take a long-term interest in the new asset.
Wall Street financial institutions like Goldman Sachs and BNY Mellon are some of the largest traditional investors in Bitcoin. While purchasing billions in the asset, Goldman Sachs cautions investors about cryptocurrency, suggesting that the company may already be serious about Bitcoin while carefully introducing the crypto market to uninformed or even skeptical investors.
