According to analysts at multinational investment bank Goldman Sachs, growing mainstream acceptance may not lead to higher digital asset prices. Instead, the institution believed that the USD value of bitcoin and altcoins correlated with inflation and other economic events.
Bitcoin May Not Go Up Due to Adoption
Many experts predict that the prices of most cryptocurrencies will surge should they receive wider mainstream acceptance. However, Goldman Sachs’ strategists Zach Pandl and Isabella Rosenberg are not convinced this will be the case.
“Crypto’s recent sell-off underscores that mainstream adoption can be a double-edged sword. While this may increase valuations, it will also likely increase correlations with other financial market variables, thereby reducing the benefits of diversification within the asset class,” they noted.
In their view, the valuation of digital assets is positively affected by macro-economical factors like breakeven inflation, the prices of crude oil, and the USD value of “frontier” technology stocks. Contrarily, the government’s intentions to combat the financial turbulence could harm the primary cryptocurrency.
Earlier this week, Jerome Powell – chairman of the Federal Reserve – reiterated the institution’s plans to raise rates and reduce the Fed’s balance sheet in March. Shortly after his speech, BTC fell from $38,200 to below $37,000.
Pandl and Rosenberg concluded that the further development of blockchain technology, including applications in the Metaverse, “may provide a secular tailwind to valuations” for certain cryptocurrencies. On the other hand, those assets will not be immune to macroeconomic forces such as central bank monetary tightening.
BTC needs to grab gold’s attention to hit $100,000
In early 2022, Pandl highlighted a scenario in which bitcoin could hit the $100,000 milestone in the following years. According to him, however, this would happen if institutional investors started to prefer buying bitcoin instead of gold.
“If bitcoin’s share of the store of value market were “hypothetically” to rise to 50 percent over the next five years, its price would increase to just over $US100,000, for a compound annualized return of 17 percent or 18 percent.”
A few days later, Guido Buehler – managing director of Swiss bank SEBA – also said that bitcoin could more than double in price this year. The executive believes that institutional investments will be the main driver:
“Our internal valuation models indicate a price right now between $50,000 and $75,000. I’m quite confident we are going to see that level. The question is always timing.”
