Mainstream Adoption Would No Longer Push Crypto Prices: Goldman Sachs

Negative commentary around cryptocurrencies isn’t a new phenomenon, and the most recent one to do the same is the leading global investment banking firm, Goldman Sachs.

The organization has recently warned crypto buyers that increased token adoption will no longer drive up prices and that macroeconomic factors are now exerting a greater influence on the markets. 

A Double-edged Sword

As reported by Bloomberg, the crypto price warning came in a note authored by two of the organization’s strategists, Zach Pandl and Isabella Rosenberg.

The analysts claimed that recent selling strategies have suggested that adoption was not driving prices. They further explained that recent crypto selloffs showed that ‘mainstream adoption can be a double-edged sword.’ 

Explaining the same, the analysts said:

“While adoption can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class.”

In fact, in the long term, macroeconomic factors and price movement in conventional macro assets are likely to affect crypto prices.

The analysts further added that additional development of blockchain technology, including applications in the metaverse, can provide a push to the valuations for certain cryptocurrencies.  

It is notable that crypto prices’ correlation with other macro assets, in the past has increased so much so that crypto ‘is now at the center of recent rotations across asset classes,’ the analysis pointed out. 

Adoption Rising, but BTC Still Struggling

While the rise in cryptocurrency adoption over the last year has been notable especially looking at the tremendous rise in the total crypto market cap. The total market cap reached a high of $3 trillion in the first week of November even though it was down almost 45% at the time of writing. 

That said, Bitcoin’s correlation to the stock market over the last few months seems to have risen. Just last week after a nearly 7% decline in the S&P 500 Bitcoin too saw a close to 17% decline while gold looked mostly flat. 

This has also hindered BTC’s narrative as an inflation hedge and store of value. Furthermore, BTC’s reducing ROIs over the last few months has fueled negative narratives around the coin.

Bitcoin’s yearly ROI vs USD at press time was +11.49% which is drastically low. Since BTC was down 45.88% from its all-time high the retail interest in the coin too has gone down over the last few weeks. 

Nonetheless, with the coin’s recovery above the $40K, the same could trigger adoption, retail interest, and higher ROIs for BTC and the larger market.