A top economist at Goldman Sachs says Bitcoin is beginning to grow up.
In a new interview with CNBC, Goldman’s global head of commodities research, Jeff Currie, says he’s seeing signs that the Bitcoin market is beginning to mature. He says increasing allocations from institutional investors will be key to reducing BTC’s volatility in the long run.
“I think the market is beginning to become more mature, and I think in any nascent market you get that volatility and those kind of risks that are associated with it. I think the key to creating some type of stability in the market is to see an increase in the participation of institutional investors. Right now they’re small. There’s about $700 billion of money in Bitcoin right now. Of that, roughly 1% of it is institutional money.”
A number of high-profile investors including Stanley Druckenmiller and Paul Tudor Jones have all recently invested in Bitcoin.
The institutional crypto asset manager Grayscale says pension funds and endowments are beginning to enter the space. Traditional asset management firms like Fidelity, Skybridge and Ruffer are buying BTC on behalf of their clients and Guggenheim Partners has also informed the SEC that it’s looking to invest up to $530 million in the digital asset.
In addition, the payments firm Square, business intelligence firm MicroStrategy and insurance giant MassMutual have allocated funds to BTC.
As for how to assess the true value of the nascent cryptocurrency, Currie says a direct comparison between BTC’s market cap and gold’s use as a defensive asset is apt.
“If you treat like a defensive asset let’s say like gold and we look at the size of defensive assets like the gold market, there’s $2 trillion or $3 trillion in those kind of markets. Now we start to ask, how much of this defensive money could be allocated to something like a cryptocurrency or a Bitcoin.
Right now, all the cryptocurrencies have about $1 trillion. Let’s say it grows to $2 trillion. Then you just do the simple math. How many coins are out there, divide it by that and you can end up with a fair value. The question is, that can give you some long-run equilibrium, but the flows that you’re referring to create a lot of volatility and a lot of uncertainty and makes it very difficult to forecast it.”
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