Goldman Sachs to Invest Millions into Crypto

Photo credit: QuoteInspector.com/Flickr

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

The Death Star of global finance is starting to have a good feeling about crypto…even if no one else does.

Goldman Sachs plans to spend tens of millions buying or investing in crypto companies, Reuters reported Tuesday. The FTX implosion didn’t flatten the crypto market, but it definitely made it significantly less crowded, which is just the way Goldman likes it.

How the Mighty Have Fallen

Wall Street’s biggest banks have been playing their own interpretation of Hamlet for almost a decade when it came to be, or not to be, involved with crypto. Goldman has been, on average, less afraid than its peers of whatever spirits lurk in the blockchain, with CEO David Solomon telling CNBC last year that while he’s not a huge fan of Bitcoin, “The key thing is how can blockchain or other technologies that are not developed yet accelerate the pace of the digitization of the way financial services are delivered.” The mega-firm has even had a digital assets group since 2018. Those investments were all made before armageddon struck the $2 billion crypto exchange FTX and its once-seemingly competent if incredibly awkward CEO Sam Bankman-Fried

FTX, of course, filed for bankruptcy after it was revealed SBF allegedly used billions worth of FTX customer funds to bail out his tanking crypto trading company Alameda Research. The monumental meltdown has torpedoed the value of cryptocurrencies, spurred more fervor for Congress to implement stricter crypto regulations, and left a bad taste in many investors’ digital mouths.

But, as the saying goes; “Forget it, Jake. It’s Goldman.” Populist panic is where the lords of 200 West Street see real opportunity:

  • While a few million is a drop in the bucket to the legacy investment bank, which earned $21.6 billion last year, it’s a signal of Goldman’s bullishness on the crypto market. Details are scarce, but digital asset head Mathew McDermott told Reuters Goldman plans on investing in crypto opportunities “priced much more sensibly.”
  • Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data, and blockchain management, and last week, it launched a digital asset platform and issued a $104 million digital bond for the European Investment Bank.

“FTX was a poster child in many parts of the ecosystem,” McDermott said. “But to reiterate, the underlying technology continues to perform.”

Solid as a Pet Rock?: Goldman’s good vibes on crypto are not being felt by its rivals. HSBC CEO Noel Quin said he has no plans to expand to crypto. Morgan Stanley CEO James Gorman said crypto isn’t a fad, but it is highly speculative. JP Morgan CEO Jamie Dimon had the least diplomatic words in an interview with CNBC, calling crypto “a complete sideshow” and as ridiculous an investment as pet rocks. But are those rocks on the blockchain?