The crypto ecosystem is quick to denounce public crypto skepticism from ill-informed traditional financial experts, who rightfully should know better. We have seen this happening over the past few days in response to recent comments by Sharmin Mossavar Rahmani, chief investment officer at Goldman Sachs Asset & Wealth Management. I'm here. Wall Street Journal interview.
That may be satisfactory, but I do not intend to add further criticism here. Instead, I will try to defend her statement. To be clear, I deeply disagree with most of them. But we also believe that by better understanding the opposing arguments, we can make a stronger case for the potential of cryptocurrencies. Additionally, your irritability levels will also decrease, which will have a positive impact on your overall health. And it's also a fun brain teaser.
Noelle Acheson is a former head of research at CoinDesk and Genesis Trading and host of the CoinDesk Markets Daily podcast.This article is an excerpt from her Cryptocurrency is now macro The newsletter focuses on the confluence of the changing crypto and macro landscape. These opinions are her own and nothing she writes should be taken as investment advice.
Let's start with the big picture and background.
First, Mosavar Rahmani has an impressive investor pedigree, including 31 years at Goldman Sachs, which is no small feat and deserves respect.
Second, she is not representative of Goldman Sachs as a whole, which has about 40,000 employees worldwide. She heads the Asset & Wealth Management division, which is separate from the Sales & Trading and Investment Banking divisions involved in the crypto ecosystem.
Third, some crypto media outlets are crying out that Goldman Sachs is currently “under pressure” or “facing heat” because of Mossavar Rahmani's comments. ing. I highly doubt Goldman Sachs cares about the crypto uprising, and its wealth management clients can find crypto exposure elsewhere if they wish.
But her remarks in the Wall Street Journal interview have been controversial, as her voice carries weight among investment managers, especially those looking for an excuse not to have to learn about crypto assets. Worth it.
1) “We don't think this is an investment asset class.”
As highlighted above, by “we” she does not mean Goldman Sachs, just the wealth management division.
The easy response here is to scoff at her limited understanding of digital assets. teeth It is an “investment asset class” in that it is traded in an active market and people invest in it. However, it turns out that the official definition of this term can differ. ChatGPT's definition matches many others I've looked at.
“A group of financial instruments that have similar financial characteristics, are subject to the same laws and regulations, and usually trade in the same financial markets.”
Mossavar Rahmani may be referring to the lack of regulatory standards for crypto assets, at least in the United States. If that second part is indeed part of Goldman Sachs' definition, then crypto assets would not fit. Anyway, anyway.
Also, it is a bit of an exaggeration to say that the companies have similar financial characteristics. Stablecoins are very different from BTC, and BTC is also very different from AVAX, BONK, and a long list of others.
We have to keep in mind that she may not be talking about whether cryptocurrencies are investable or not, but about the characteristics of the category.
2) “How can you be bullish or bearish if you can’t assign a value?”
This is easy to make a strong exception to. Because we all know that you don't need to have a specific value in mind to believe that something will go up or down. We also all know that it is impossible to accurately value crypto assets because there are too many reasons that cannot be explained here. But there is no shortage of bulls and bears. So, obviously, it's a provable fallacy, right?
Hmm. For now, let's put ourselves in Mosavar-Rahmani's shoes. She runs an investment advisory division, which is subject to considerable scrutiny and bureaucracy. She couldn't survive 31 years in a particularly cutthroat organization, taking inexplicable risks with other people's money. Traditional investment advisors need to be able to justify their decisions to their clients, and they need to “show their work” in case the investment doesn't work out. If her team cannot assign a model-based value to her BTC, they cannot make buy or sell recommendations.
Most of us don't have Goldman Sachs-level constraints. For me, the “rise” is enough and based on the “feel” I have an approximate number that will allow me to make some profit. Other investment advisors I spoke with also came up with target levels, but they weren't based on tested methodologies.
I will admit that Goldman Sachs has a number of very smart investment analysts who can come up with models that are definitely valid. Other major companies are doing it, and even if there's little consensus, it's the reasoning that matters. Challenges aside, I think we have a right to expect more from companies that have established themselves as pillars of Wall Street. It seems like a lazy idea that there is no “official” model.
But Mossavar-Rahmani's job is to play it safe. In that context, her comments are not out of place.
3) “[Crypto] No value is created in any way. ”
Well, this is really hard to defend. Cryptoassets offer a wide range of services and use cases that have value. Even though he limits his discussion to BTC, it clearly has value for people suffering from currency depreciation and limited financial access.
However, it turns out that the word “value” is highly misunderstood, even among investment professionals. Most of us believe that the concept has something to do with usefulness, gratitude, satisfaction, a sense of belonging, and many other emotional benefits. Art has “value,'' and so do flowers and friendship.
But perhaps Mossavar Rahmani was referring to the “assigned values” we saw in the previous section. Wasn't he trying to say that without an established model to spit out numbers, it's worthless?
No, I'll give up. This is indefensible and shows a lack of understanding on her part, but since no one doubts her intelligence, it can only be attributed to laziness. “Absolutely” worthless?? “In any way”? Sigh. I tried.
4) “Major decisions end up being driven by a few dominant people.”
On this point, she's actually pretty much right. Adding the modifier is highly recommended. ”Several of “The main decisions will end up being like this” or “The main decisions will be In some networks, Eventually it will happen. ” But overall, I agree that the word “decentralization” is often misused.
Once again, “decentralization” is not an either-or condition. There are varying degrees. And many networks are gradually working towards further decentralization, as promised.
Here is perhaps the most revealing quote from the interview.
5) “At least you can hold and store physical gold. You can’t do that with cryptocurrencies.”
Goldman Sachs has a long history of not recommending gold, and one theory is that while the investment banking division doesn't make money by issuing gold, it makes a lot of money by helping companies issue stocks and bonds. It is said that this is because I don't know if I'd buy it, but it's unusual to see a major investment manager ignore such an important asset.
Perhaps it's because gold doesn't create any tangible “value” either? Gold has no cash flows or dividends. And if there is no tangible value to it, how can an advisor be bearish or bullish? And is gold actually “creating” value, producing anything? Will it be profitable? no.
I think this statement reveals a lot about other people. It emphasizes Mossavar Rahmani's definition of “value” as something that needs to be created. For her, value may require tangible output.
This also highlights her limited understanding of how crypto assets work.many do There is a concrete output. And almost everything can be kept and stored.
It's also tempting to point out that this comment suggests a limited view of gold investing, as very few institutional or high-net-worth gold investors actually hold their own bullion.
But taking a step back, the purpose of this exercise is to show that not all crypto critics are wrong about everything, and to help you understand exactly where the barriers to acceptance lie. Masu. It also helps to recognize that conflicting views shape markets, and that in the long run they don't really matter.
More importantly, it's satisfying to think that all the people we know personally also initially rejected the concept of cryptography. Smart, educated people immersed in financial knowledge will eventually decide to strive to better understand what we are seeing, and in the end we will all change our minds. I changed.
Perhaps Mossavar-Rahmani will change his mind one day. Or maybe not. it doesn't matter. If our once-skeptical friends can approach our point of view with an open mind, we should strive to approach our critics in the same way. At least it will help you better understand where you need to focus and explain.
