Goldman Sachs Thinks Mainstream Adoption is Bad For Bitcoin Price

In many ways, the year 2021 was a watershed moment for cryptocurrency. According to reports from crypto experts, this year appeared to be the year of bitcoin widespread acceptance.

The massive mainstream breakthrough, on the other hand, is a “double-edged sword.” According to a recent analysis by Goldman Sachs, this is the case.

On the one hand, prices are almost certain to rise. Crypto, on the other hand, appears to be becoming increasingly linked to the same adversary that bitcoin was meant to combat: traditional financial markets.

Goldman Sachs analysts Zach Pandl and Isabella Rosenberg wrote to investors on Thursday, pointing out that the entire market cap has decreased by 39% since November. The drop is noteworthy since it was mostly caused by macroeconomic forces outside of the cryptocurrency sector.

Massive crypto liquidations have frequently followed significant sell-offs in the financial markets. Bitcoin has reached its highest degree of correlation with the Standard & Poor’s 500, according to the Wall Street bank. The flagship cryptocurrency, in particular, is positively connected with frontier technology stocks, inflation proxies, and crude oil, while being adversely correlated with the USD and real interest rates.

“Mainstream adoption can be a double-edged sword. While it can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class.”

To put it another way, the more connected bitcoin is with legacy markets, the lower the asymmetric profits will be.

The latest crypto market meltdown occurred after the US Federal Reserve announced plans to keep interest rates at zero percent while also significantly shrinking the size of its balance sheet whenever rate rises begin.

Massive crypto liquidations have frequently followed significant sell-offs in the financial markets. Bitcoin has reached its highest degree of correlation with the Standard & Poor’s 500, according to the Wall Street bank. The flagship cryptocurrency, in particular, is positively connected with frontier technology stocks, inflation proxies, and crude oil, while being adversely correlated with the USD and real interest rates.

To put it another way, the more connected bitcoin is with legacy markets, the lower the asymmetric profits will be.

The latest crypto market meltdown occurred after the US Federal Reserve announced plans to keep interest rates at zero percent while also significantly shrinking the size of its balance sheet whenever rate rises begin.

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