Major US Investment Firms Losing Faith in Cryptocurrency?
For a lot of 2017, there was a lot of skepticism about the potential future of bitcoin and other digital currencies. There were many well-known personalities in the investor space such as Charlie Munger and Jamie Dimon (CEO of JP Morgan) saying that bitcoin was a bubble and it wouldn’t last.
There was a shift seen in the closing months of 2017 of bitcoin and blockchain technology becoming more widely accepted, with the launch of bitcoin futures and the likes of Dimon backtracking on his previous condemnation of bitcoin.
Many large venture capital funds and investment institutions began to invest more and more into blockchain technology companies.
Even governments have been getting on board, with crypto-friendly regulations being drawn up by the likes of Switzerland and a number of countries either launching or in the planning phase of having their own national digital currency.
However, with some significant dips in the crypto market since the turn of the year, there has been growing unease on a number of fronts.
While many people are seeing these dips as chances to add to their positions by buying different cryptocurrencies at a discount, others have turned skeptical and are starting to liquidate their holdings and getting out of the sector entirely.
Financial Firms Concerned about the Risk of Cryptocurrencies
The giant of investment banking Goldman Sachs has said in a filing that was released on February 26, 2018, that they now see their connection with blockchain and cryptocurrencies as being a potential business risk.
This came just a week after Bank of America discussed the compliance and competitive risk that this technology was causing and would continue to inflict in the future.
Goldman believes that they may be exposed as a result of investments they have made on behalf of their clients, allowing them access to the bitcoin futures market, as well as their investments in blockchain companies such as payments company Circle who have just acquired a significant crypto exchange called Poloniex.
As they believe these risks to be substantial, Goldman has been avoiding getting more heavily involved in the crypto market. It was in January that the CEO Lloyd Blankfein said that they would not be launching a trading desk dedicated to bitcoin.
Invest in Crypto Only if You can “Stomach Potentially Complete Losses”
To further add to the unease that investors are feeling both in the United States and across the world have been having, the worldwide investment management company BlackRock has publicized some of their bearish thoughts.
While they are optimistic that blockchain technology is here to stay in the long run and they see the potential benefits associated with cryptocurrencies, they are of the belief that many significant obstacles are standing in their way. They have warned investors only to get involved in this sector if they can “stomach potentially complete losses.”
BlackRock is avoiding having blockchain-related companies included in their mainstream investment portfolios as these investments are too risky, volatile and unregulated at this moment in time.
They are adamant in their belief that there is massive potential associated with blockchain technology, but the adoption of it wouldn’t be straightforward and would need close communication with central bankers and regulators.
It is clear that institutional investors are going to remain very cautious about this sector for the time being and they would rather sit back and watch how the industry developers before getting heavily involved.