A highlight from Goldman Sachs To Offer Bitcoin to Wealthy Clients, Completely Reversing Course

Automatic TRANSCRIPT

Of covid nineteen as shuttered markets. Economies lives central banks have been spurred to action with people on lockdown unable to work unable to make money unable to keep the gears of the economy turning. Everything is threatened and it's not just day to day lives but the cascade of failures that could happen. If people can't pay for things like rent and mortgages an unprecedented money printing operation is underway. And it's not just the us but everywhere all at once regardless of one's feeling about whether that action from central banks was necessary there was a sense among many that there would ultimately be negative consequences as well. Whatever the important short term impact. Because this wasn't just a one time shift in the relationship of the government to markets. It was the natural extension of a policy experiment that started during the great financial crisis. All the way back in two thousand eight two thousand nine this was of course to backstop markets with not only low interest rates but never ending liquidity in the form of asset purchases of course in two thousand twenty times called for new measures and the feds toolkit expanded being able to buy in ever widening set of assets to backstop the market in this environment. Some started to ask when we get through this and we will get through it. What will the state of things be. Then enter paul tudor jones. Paul tudor jones is a famous hedge. Funder who among other things called the crash of nineteen eighty seven in early may of last year. He wrote a letter about what he called the great monetary inflation and. Let's just read the first few paragraphs covid nineteen is a one of a kind virus that has triggered a one of a kind policy. Response globally the depth and magnitude of the economic drop-off took modern monetary theory or the monetization a massive fiscal spending from theoretical to practice without any debate. It has happened globally with such speed that even a market veteran like myself was left speechless. Just since february a global total of three point nine trillion dollars six point six percent of global gdp has been magically created through quantitative easing. We are witnessing the great monetary inflation an unprecedented expansion of every form of money. Unlike anything the developed world has ever seen global debt was very elevated entering the pandemic and this monetary expansion is funding large additional debt creation for now without provoking the disciplining responsive rising market yields. So far the has been asset price reflation a large demand shortfall will prevent services inflation from rising in the short term. The question is whether that will be the case in the long term with the central bank who central focus will be repairing the worst employment crisis since the great depression. One thing is for sure there will be many assets that will move as a result of this money creation so what is an investor to do traditional hedges like gold have done well and we expect investors to continue to seek refuge in the safe asset. One thing i've learned over time is the best thing to do. Is market price action. Guide your decision making and then try to understand the fundamentals as they become more evident comprehensible quite often how the markets respond will be at odds with your priors but remember the pl always wins in the long run with that in mind in a world craves new safe assets. There may be a growing role for bitcoin. I genuinely believe that when the financial history books are written about this time this paper will be seen. As the seminal moment for the institutional shift towards bitcoin there would be others who followed throughout two thousand twenty stand druckenmiller. For example being notable but paul tudor. Jones is the first and to the extent we have indeed moved into a new bitcoin super cycle. This will be seen as even more significant of course is reward is not just the accolades but the position itself which has about sex toppled. He took it looking for the best way to unlock your cryptos. Liquidity next dot. Io is exactly what you need borrow. Against your digital assets just five point nine percents apr earn passive income with yields of up to twelve percent and swath between more than seventy five market pairs with the instant next so exchange. Try the next wallet app to get the whole three hundred. Sixty degrees of crypto banking. Get started at nikko dot. Io until now blockchain technology has been a series of compromises. No layer one protocol exists in the market that supports everything enterprises developers and consumers need from decentralized applications meet kaspar caspar provides the blockchain ecosystem with a solution that makes no compromises around decentralisation security or performance learn more at casper dot network not. Everyone was as quick to come around. Indeed some of the biggest names in the financial world not only rejected. Paul tudor jones premise of bitcoin as an inflation hedge but went to pains to reinforce their dismissal. On wednesday may twenty seven twenty twenty goldman sachs released a slide presentation and held a call titled us economic outlook and implication of current policies for inflation gold and bitcoin. They captured attention in our neck of the world for the big bold headline on slide. Thirty crypto currencies including bitcoin are not an asset class. This slide went to repeat their reasons for this cryptos. Don't generate cash flow like bonds. They don't generate any earnings through exposure to global economic growth. They do not dampen volatility given historic volatility they do not show evidence of inflation hedging and then there was this gem we believe that a security whose appreciation is primarily dependent on whether someone else's willing to pay a higher price for it is not a suitable investment for our clients as though goldman sachs every security in this markets appreciation is not primarily dependent on whether someone else is willing to pay a higher price for it there was so much critique about this slide. There still is so much. To critique about this slide and by the way they went on in the next set of slides to talk about hack his threat. They talked about illicit purposes. So they would be right at home in today's fide. Oh and my favorite presenters on the call brought up the idea that bitcoin wasn't in fact scarce because forks who come at any time at the end of the day however the real thing was this summary bullet on the very last slide quote. We do not recommend bitcoin on a strategic or tactical basis for clients investment portfolios. Out the time my thought was that there had to be a reason that they put together this seemingly hastily designed no new information presentation. This was their consumer wealth group. I e the group that deals with private wealth clients which led me personally to believe that they must have been fielding an absolute crap ton of questions from their clients who were asking about bitcoin. Remember at this time. It wasn't just paul tudor jones. It was the asset itself that was capturing attention. Bitcoin had entirely recovered. Its losses from black thursday march twelve showing. Just how resilient it was from there. Let's fast forward ten months or so. Obviously bitcoin has made fools of the skeptics. Were sitting around here. Board at sixty thousand and the longer we stay above fifty thousand the more the market gets convinced that this is the new price floor. What's more since goldman released. Its note we've had a huge array of institutional actors get into the space including those hera gones of risk taking the insurance company. General accounts like mass mutual. In fact we've had an entire new category of demand in the form of corporate treasury holdings kicked off by microsoft and brought to the mainstream by tesla by the way a quick aside remember when tesla's said they were running nodes and would be active participants in the bitcoin ecosystem. Today's top headline on. Coined esque is quote. Tesla just helped patch of bug in this open source. Bitcoin payment processor in short. They caught a bug in. Btc pay server and help the team with a patch as mr huddle put it on. Twitter tesla's can contribute to bitcoin. What planet am i on anyway. The point is that there have been these massive shifts in who is buying and how much they're buying and why they're buying and how likely to keep buying they are. This is prompting some like. Dan held to argue in a new bitcoin super cycle that will break the market patterns of the past and so it becomes fair to ask where is goldman with bitcoin. Now this

Coming up next