Goldman Sachs Executive: Digital Asset Market to Grow by 2024

Goldman Sachs executives say the digital asset market will grow and mature further next year as more blockchain business applications enter the market and regulation helps facilitate their use in new investment applications.

In an interview with Fox Business Channel, Mathew McDermott, Goldman Sachs’ head of digital assets, said that one of the biggest developments in the digital asset space over the last year has been the increasing involvement of traditional financial institutions in the space over the last 12 to 18 months .

He explained that this has happened against the backdrop of a growing realization that digital assets can “improve efficiency, can reduce risk, and can have a number of very positive impacts on business models and the way businesses operate. That’s where increased regulatory transparency globally has helped.”

McDermott said digital assets are at a stage where there is wider acceptance of the technology, which allows the market to focus on “building and creating scale,” which is “the stage where you really start to see business value propositions emerge” being realized.

“When I think about tokenization, it’s obviously a widely discussed topic, and I think for me next year we’re going to start to see the market evolve. So we’re starting to see scale adoption, particularly in various areas” where the context of the investor is the buyer. And that’s because we’re going to start to see the emergence of secondary liquidity in the chain, which is a key enabler. So for me, that’s one of the key developments for next year.”

McDermott added that greater adoption of the technology will enhance “collateral liquidity” next year by addressing issues in the “financial pipeline of the market”.

“When you look at collateral liquidity, you realize that there are still a lot of inefficiencies in the decades-old system. This can be issues such as custodial fragmentation, lack of synchronization of settlements, and inefficient use of capital and liquidity.” , McDermott explains. “So when you play through that, that’s what I fully expect for next year — when you really start to see people adopt this technology, they’re going to recognize that not only can you see the business proposition of the future , you can actually see it today. ”

“At a very micro level, we’re already doing that, we’re active in that space, we’re already starting to see the commercial value of it. Now that the market is really focusing on this space, they’ve realized that you can mitigate the risk, the operational settlement, and the jump risk in terms of collateral allocation,” McDermott said.

He went on to say that by 2024, he sees growth focusing primarily on more general asset classes, and then gradually starting to expand into more opaque asset classes towards the end of the year and beyond.

“I fully expect buy-side adoption to grow significantly next year,” McDermott said.

“And then I think probably by the end of this year, probably the next and beyond, you’ll start to see some attention to more opaque asset classes that may have a greater value proposition purely because of the opacity of pricing, probably less liquidity, but more transparency,” he added.

The U.S. Securities and Exchange Commission is considering an application for approval of bitcoin and ethereum spot exchange-traded funds (ETFs), which could take place in early 2024 so that traders can use the securities. McDermott said approval would allow more institutional investors to enter the digital asset market, even if they don’t necessarily invest directly in the underlying assets.  Bitcoin mining

“First, it broadens and deepens the liquidity of the market. Why is this important? It does so because you’re actually creating institutional products that can be traded by institutions that don’t need to have access to the bare assets,” McDermott said. “I think, for me, it opens the door to pensions, insurance companies and so on.”  Kaspa Miner

He added that while he doesn’t expect the approval of spot cryptocurrency ETFs to lead to major changes in the market immediately, the market will grow within a year.

“I think even if it gets approved in the first quarter, you’ll gradually see liquidity and a broadening and deepening of those looking to trade the product throughout the year. It is known to be the best performing asset class this year.”