Bitcoin (BTC) is seeing unprecedented demand from institutional investors, according to Matt McDermott, the head of digital assets at global investment bank Goldman Sachs.
McDermott said 40% of the nearly 300 Goldman Sachs institutional customers already have exposure to crypto assets through derivatives, securities products and other offerings, he said on a podcast.
As a result, he added, a growing number of banks are looking to develop new investment products to satisfy that demand.
According to the bank’s executive, the current situation in the cryptocurrency market is different from the retail-based 2017 rally because of the continuing “huge” demand from institutions and private banking clients.
“[W]e have seen no signs of that abating. And when we talk about institutional demand, we talk about the whole cross section of the industry sectors… And when I talk about the broad spectrum, I’m referring to hedge funds, to asset managers, to macro funds, to banks, to corporate treasurers, insurance, and pension funds.”
He added that 76% of those institutional customers expect Bitcoin’s price to be between $40,000 and $100,000 at the end of 2021, while 22% expect it to be over $100,000. And 61% expect to see those investments increase in value over the next year.
McDermott also confirmed recent reports that Goldman Sachs is reopening its Bitcoin trading desk to offer Bitcoin futures to its customers. Still, he said that the focus of the bank’s crypto efforts will be “quite narrow initially,” adding that U.S.-based banks have to comply with local regulations that bar them from trading physical crypto assets.
That access to physical crypto assets has been particularly in demand from hedge funds and macro fund asset managers. One possible solution, he said, is “developing institutional exchanges” with banks in parts of Asia that are allowed to trade physical crypto assets.
McDermott was also bullish on blockchain, saying it allows for “a real diverse set of opportunities for the financial industry and something that there’s a huge amount of momentum” for in the market. He continued:
“We know firsthand just given the various different projects we’re working on. And we see this as a hugely exciting time exploring the potential of that technology.”
Institutional enthusiasm is at record highs. Major international investment bank Citi recently suggested in a recent report that Bitcoin is at a “tipping point” that could lead either to mainstream acceptance or a “speculative implosion.”
Since the start of this year, Bitcoin saw adoption by United States’ oldest bank BNY Mellon, payment processing giants Mastercard and Visa as well as many major investors ranging from Tesla and Mass Mutual insurance to MicroStrategy. Given the current pace, many industry insiders are now wondering which institution will be the next to earn its spot on this list.