According to Goldman Sachs, the rise in popularity of bitcoin (BTC) and cryptocurrency market adoption may not necessarily result in a rise in its price in dollar terms.
When it comes to cryptocurrency, the word ” market adoption ” refers to a point in time when cryptocurrency is widely accepted in business. In addition, it is the phenomenon wherein cryptocurrency becomes the legal tender all over the world. Even though experts estimate that this event will be impossible to prevent. This does not rule out attempts by governments to prevent it.
A paper published on Thursday suggested that popular acceptance of crypto assets would boost their link to other mainstream asset classes. This is according to Bloomberg – the worldwide banking behemoth. Furthermore, according to Goldman, adoption is a “double-edged sword.”
Goldman expressed a strong disinterest in the idea of cryptocurrency as a vehicle for the enrichment of the general public. This is in stark contrast to the views of many Bitcoin proponents.
Even though it has the potential to improve valuations; it is also expected to increase correlations with other financial market variables. This lowers the advantage of owning the asset class for diversification purposes, according to the note. Furthermore, some asset holders find this phenomenon a great disadvantage on their part.
Mainstream market adoptive parenting is a “double-edged sword”
According to Zach Pandl and Isabella Rosenberg, the authors of the paper, “mainstream adoptive parenting” is a “double-edged sword” too.
To put it another way, if Bitcoin or cryptocurrency begins to become increasingly correlated with existing assets, the opportunity for asymmetric profit will be less.
Those remarks come at a time when cryptocurrency markets are indeed showing a higher correlation with equities, particularly this month. The estimates for 2022 do not appear to favor a strong recovery – at least in the short term.
Goldman Sachs, on the other hand, has not entirely adhered to one story. They are arguing earlier in January that Bitcoin/USD may yet reach $100,000 – perhaps paradoxically. This is snatching the market share from gold and therefore bringing in more traditional investors.
Is it as simple as supply and demand?
Alternative Bitcoin theories expressly reject the notion that correlation will outpace the rate of profits produced by other factors in the future. According to analysts, the breaking of the ‘bear market’ in Bitcoin demand will ignite the next BTC price spike.
Analysts believe that the basic mathematical calculation of declining supply in the face of increased adoption is a de facto guarantee of greater pricing in the future when compared to fiat currencies.
When you combine Bitcoin’s consistent emission schedule with the expanding number of wallet entities; you have a scenario that is continuing to play out despite the recent price dip in the short term.
The downturn that began in November, on the other hand, has failed to dampen the enthusiasm of those with larger wallets, according to statistics from the cryptocurrency tracking portal Santiment.