Goldman Sachs CIO says crypto isn’t ‘an investment asset class’, Cathie Wood pushes back

(Kitco News) – The launch of spot Bitcoin (BTC) exchange-traded funds in the U.S. was expected to bring a new level of legitimacy to cryptocurrencies, but according to the head of Goldman Sachs Wealth Management, the asset class has not yet reached the level where the bank feels comfortable recommending it to clients. 

“We do not think it is an investment asset class,” said Sharmin Mossavar-Rahmani, chief investment officer of Goldman Sachs Wealth Management, in an interview with The Wall Street Journal. “We’re not believers in crypto,” she added, comparing the excitement around the asset class to the tulip mania of the 1600s. 

While her position on the matter risks costing Goldman clients potential gains while appearing out of step with markets, Mossavar-Rahmani remains resolute in her opinion of digital assets, preferring that clients stay fully invested in U.S. stocks and ​minimize their exposure to China and other emerging-market countries.

Mossavar-Rahmani said that despite Bitcoin’s runup to nearly $74,000, she continues to hold a negative view of Bitcoin and the broader crypto market, noting that it’s nearly impossible to accurately value cryptocurrencies, which don’t produce earnings, cash flow, or dividends.

“If you cannot assign a value, then how can you be bullish or bearish?” she asked rhetorically. 

While many view central banks and the government as flawed and the main source of economic struggles, Mossavar-Rahmani maintains that U.S. government policymakers play beneficial roles in society, despite their miscues.

She also holds a negative view of cryptos due to their use in various crimes, such as ransomware attacks, saying “The rule of law and systems of checks and balances matter.”

Her opinion on digital assets is well-known among investing circles as she published a critique of crypto in June 2021 titled, “Digital Assets: Beauty is Not in the Eye of the Beholder,” which argued that Bitcoin is too volatile to be a reliable medium of exchange and that it is “unlikely that it will be used broadly.”

While Bitcoin still has minimal uses in everyday life, it has become popular among traders as its price has more than doubled since the critique was published. This has made Mossavar-Rahmani even more skeptical about King Crypto, leading her to harden her stance on the asset. 

Bitcoin “creates absolutely no value in any shape or form,” she said. While crypto proponents proclaim that it will lead to a decentralized financial system with a greater level of democratization, “the main decisions end up being driven by a few controlling people,” she added. 

Despite her disdain for cryptocurrencies, Mossavar-Rahmani said she sees promise in the underlying blockchain technology and thinks the movement to tokenize real assets will lead to a more efficient financial system. 

She also thinks that central-bank digital currencies (CBDCs) could eventually be useful, and she acknowledged that while gold doesn’t produce earnings and is hard to value, it has historically been popular as an investment and for use in jewelry. 

“At least you can hold onto physical gold and store it; you can’t do that with crypto,” she said. “And anyway, we don’t encourage people to own gold.”

Mossavar-Rahmani’s opinion of Bitcoin and crypto stands in stark contrast to ARK Invest CEO Cathie Wood, who recently said its price is rising because it is a “flight to safety” against devaluing fiat currencies during an interview with CNBC. 

Wood described BTC as both a risk-on and risk-off investment and said that while institutions are finally getting in on the Bitcoin action, average investors are being presented with an even more important opportunity.

“There’s something else going on around the world,” she said. “There are currency devaluations taking place that people are not talking about,” citing the fact that the  Nigerian naira and Egyptian pound have lost roughly half their value against the U.S. dollar in recent months.

Wood noted that in these instances, as well as others, it has been deliberate government interventions, not direct market forces, that have negatively affected the exchange rate. 

“I think this is a flight to safety, believe it or not, taking place,” Wood said. “A hedge against devaluation, a hedge against a loss of purchasing power and wealth.”

Briefly touching on the U.S. regional banking crisis that occurred in early 2023 and the Greek financial crisis of 2013, Wood concluded that Bitcoin now serves as “an insurance policy against rogue regimes or against just horrible fiscal and monetary policies.”