Goldman Sachs to increase crypto stake at deep discount, after FTX exchange collapse

  • Goldman Sachs, an American multinational bank, is performing due diligence on a number of crypto firms after the FTX exchange collapse. 
  • The Wall Street giant plans to spend millions of dollars buying crypto companies that are more “sensibly priced” following the recent shakeout. 
  • The ripple effects from FTX exchange’s collapse have boosted Goldman's trading volumes as investors seek regulated counterparties. 

Goldman Sachs, one of the world’s largest investment banks, is ready to spend millions of dollars to scoop up crypto firms whose valuations have been hit. The recent collapse of Samuel Bankman-Fried’s FTX exchange resulted in a shakeout in crypto, Goldman Sachs’ executives believe cryptocurrency firms are now more “sensibly priced.” 

Also read: Jim Cramer urges investors to sell crypto holdings, says XRP, Cardano, Dogecoin and MATIC could go to $0

Goldman Sachs prepares for discounted purchase of crypto firms 

Goldman Sachs, the financial services giant and American multinational bank is performing due diligence on several crypto companies after FTX exchange’s collapse. The recent liquidity crisis that hit Samuel Bankman-Fried’s FTX exchange, trading firm Alameda Research and 190 related entities resulted in a Chapter 11 bankruptcy filing. The contagion spread to firms like BlockFi, Genesis and Voyager, among others.

FTX exchange owes $3.1 billion to its creditors according to its bankruptcy filing. Goldman Sachs identified this as an opportunity to increase their crypto stake amid deep discounts from the FTX collapse-induced crash.

Mathew McDermott, Goldman Sachs’ head of digital assets told Reuters, 

FTX's implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business. We do see some really interesting opportunities, priced much more sensibly.

Reuters reported that the American multinational banking giant could potentially invest millions in its purchase of crypto firms. The amount that Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year. 

Goldman Sachs’ willingness to invest in the stressed crypto sector is bullish

The American banking giant’s interest in crypto firms hit by cryptocurrency’s collapse is bullish for crypto. David Solomon, CEO of Goldman Sachs spoke to CNBC as the FTX collapse unfolded. Solomon said that he views cryptocurrencies as "highly speculative" and sees much potential in the underlying technology as its infrastructure becomes more formalized.

Goldman Sachs’ rivals Morgan Stanlet and HSBC believe crypto has no intrinsic value and have no plans to expand into crypto trading or investing for retail customers. In contrast to industry-wide opinion, Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott’s team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk. Goldman Sachs recently joined hands with MSCI and Coin Metrics and launched data service datonomy, a project aimed at classifying digital assets based on how they are used.

FTX exchange collapse fueled spike in Goldman Sachs’ trading volumes

The ripple effects from FTX exchange’s collapse boosted trade volumes on Goldman Sachs. Head of digital assets Mathew McDermott said investors are seeking regulated and well capitalized counterparties to trade crypto. 

McDermott said, 

What's increased is the number of financial institutions wanting to trade with us. I suspect a number of them traded with FTX, but I can't say that with cast iron certainty.

With initiatives from American banking giants like Goldman Sachs, institutions can access cryptocurrencies through regulated counterparties and increase inflow of smart money to risk assets like Bitcoin.

Bitcoin price hits ‘potential bottom’ according to on-chain data

November was a painful month for crypto traders, however looking at on-chain data reveals hallmark signs that appear before Bitcoin price bottoms. Extended periods of forced selling, capitulation and rise in realized losses precedes a Bitcoin bottom.  

These signals observed in November 2022 were seen in July 2022 during the $41 billion collapse of the Terra LUNA sister tokens and March 2020 crypto crash induced by COVID-19. 

Bitcoin’s realized price is a stable view of BTC growth and capital inflows. Realized market capitalization is the average cost basis of the network which tracks the latest price where each UTXO moved last.

The realized market capitalization is now down 17.33%, significantly higher than 2015 and 2018 cycles. 

BTC realized capitalization drawdown

BTC realized capitalization drawdown

Pentosh1, crypto analyst on Twitter believes Bitcoin price has upside potential. BTC hit $17,400, the analyst has set $17,500 as the next target for Bitcoin. 

BTC/USDT price chart

BTC/USDT price chart 

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