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As the Goldman Sachs strategists shared their broad opinion on crypto prices, they made reference to the role new innovations like metaverse is likely to herald.
Two strategists from the American multinational investment banking firm, Goldman Sachs Group Inc (NYSE: GS) are not as optimistic about the chances of mainstream adoption boosting the underlying prices of Bitcoin (BTC), and other crypto assets as many proponents of the nascent asset class are.
Per a Bloomberg report citing a published note from Zach Pandl and Isabella Rosenberg, both strategists claimed the latest price correction born out of erratic selling strategies suggested that adoption was not driving prices. The duo believes the latest selling strategies reveal “mainstream adoption can be a double-edged sword,” which can push valuations for these digital currencies up, but not price.
“While [adoption] can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class,” they wrote.
Since the beginning of the year, the price of Bitcoin has been nosediving just like those of traditional stock market indices. While Bitcoin touched a 6-month low of around $33,000, the S&P 500 (INDEXSP: .INX) was dragged down below the 4,500 benchmarks for the first time since October last year a few days ago, with the outlook not significantly improved.
In the case of digital currencies, the massive embrace of the assets is not likely to result in mass enrichment, the Goldman Sachs strategists argue. The claim comes as companies like MicroStrategy Incorporated (NASDAQ: MSTR) have been accumulating Bitcoin on their balance sheet with the primary expectations that the price will continue to rise over time.
While there was a massive deviation in the forecasts and expectations for Bitcoin toward the 2021 year-end, many Bitcoin proponents are still optimistic that BTC is a rare investment asset whose ingrained scarcity and tech will continually make valuable over time. New forecasts are now rolling in this year, with projections for the premier digital currency to touch a $100,000 valuation.
Goldman on Crypto Prices: Metaverse Impact
As the Goldman Sachs strategists shared their broad opinion on crypto prices, they made reference to the role new innovations like metaverse is likely to herald. According to them, the presence of the metaverse can impact the price or valuation of certain assets, as it represents a new utility feature that can redefine social interactions on the internet.
Nonetheless. The impact of the metaverse will not make cryptocurrencies immune to macroeconomic and monetary tightening.
“But these assets will not be immune to macroeconomic forces, including central bank monetary tightening,” the authors noted.
Additionally, Bitcoin may not benefit much from the advent of the metaverse as it is a close network without the feature of a smart contract. This implies that unlike other protocols like Ethereum (ETH), Avalanche (AVAX), and the Binance Smart Chain (BSC), decentralized metaverse-focused applications cannot take up residence on Bitcoin. This may impact the longer-term utility of Bitcoin and its subsequent valuation in the near future.