—’’’’’T’’’’’’’’’

Global Macro
Research’’’

ISSUE 98| 2021年05月21日 午後6.00PM EDT

’

TOPof
MIND

暗号資産：新たな資産クラスとなるのか？

信用度の高い投資家からの関心が高まり、従来型の金融機関－当社含む－が新
たな暗号商品やサービスを開始するなかでも暗号通貨価格の極端な変動が続いており、暗号資産は間違いなく｢最大の関心事(Top of Mind)｣となっている。最近の乱高下のなか、暗号資産は制度化された資産クラスとみなしうるのか、またみなすべきなのかをギャラクシーのマイケル･ノボグラーツ氏(イエス；暗号
通貨に関わる信用度の高い投資家の数がクリティカルマスに達した事実だけでもそれは確固たるものとなった)、NYUのヌリエル･ルービニ氏(ノー；暗号通貨にはインカムや実用性、経済のファンダメンタルズとの関連性が全くない)、
グレイスケールのマイケル･ソネンシャイン氏(イエス；2020年の力強い反発は投資家に資産クラスとしての弾力性を改めて保証した)、当社マシュー･マク
ダーモット(｢イエス｣と答える投資家が増えている)などの専門家に尋ねた。また、当社リサーチ･アナリストもこの議論に参加している。続いて、アラン･コーエン元SEC顧問やトレイル･オブ･ビッツのダン･グイド氏、チェインアリシスのマイケル･グロネガー氏とともに機関投資家による採用が一段と進む上での規制や技術、セキュリティ面での障害を探る。

“「[暗号資産に]関与する機関がクリティカルマス
に達した。大手行からPayPal、Squareに至るあらゆる機関が関与を深めており、これは暗号資産が今や正式な資産クラスとなったことを明確に示している。」
マイケル･ノボグラーツ「ビットコインその他の暗号通貨は資産ではない。資産にはファンダメンタルな価値を判断するのに使用可能な多少のキャッシュフローまたは実用性がある…ビットコインや他の暗号通貨にはインカムも実用性もない。」
ヌリエル･ルービニ「暗号資産に関する研究で、その資産クラスとしての可能性に心から驚嘆していないものはまだみたことがない。」“

マイケル･ソネンシャイン

ｱﾘｿﾝ・ﾈｰｻﾞﾝ | allison.nathan@gs.com

目次
INTERVIEWS WITH:
Michael Novogratz, Co-founder and CEO, Galaxy Digital Holdings
Nouriel Roubini, Professor of Economics, New York University Stern
School of BusinessMichael Sonnenshein, CEO, Grayscale Investments
Mathew McDermott, Global Head of Digital Assets, Goldman Sachs
Alan Cohen, former Senior Policy Advisor, US Securities andExchange Commission
Dan Guido, Co-founder and CEO, Trail of Bits
Michael Gronager, Co-founder and CEO, Chainalysis
BITCOIN AS A MACRO ASSET
Zach Pandl, GS Markets Research
CRYPTO IS ITS OWN CLASS OF ASSET
Jeff Currie, GS Commodities Research
WHAT IS A DIGITAL STORE OF VALUE?
Mikhail Sprogis and Jeff Currie, GS Commodities Research
THE ROLE OF CRYPTO IN BALANCED PORTFOLIOS
Christian Mueller-Glissmann, GS Multi-Asset Strategy Research他

ｶﾞﾌﾞﾘｴﾙ・ﾘﾌﾟﾄﾝ・ｶﾞﾙﾌﾞﾚｲｽ | gabe.liptongalbraith@gs.com ｼﾞｪﾆｰ・ｸﾞﾘﾑﾊﾞｰｸﾞ| jenny.grimberg@gs.com

本資料はあくまでも投資を決定する上での一要素とお考えください。 レギュレーションACに基づく証明事項ならびにその他の重要な開示事項は、巻末の開示事項、またはwww.gs.com/research/hedge.html に記載されております。

The Goldman Sachs Group, Inc.

Issue 98
El

暗号資産：新たな資産クラスとなるのか？
暗号資産への信用度の高い投資家からの関心が高まり、従来型の金融機関－当社含む－が新たな暗号商品を市場投入するなかでも、規制による取り締まりや環境上の懸念、課税強化のニュースを受けて暗号通貨価格の極端な変動が続いており、暗号資産は間違いなく｢最大の関心事(Top of Mind)｣となっている。
当社が初めてビットコインに関するリサーチを作成したのは2014 年で、2018 年には暗号資産全般について調査を行い、暗号エコシステムの可能性とリスクを探った。最近の乱高下のな
か、今回は暗号資産を制度化された資産クラスとみなしうるのかに重点を置く。
まず、ギャラクシー･デジタル･ホールディングスの共同創立者であるマイケル･ノボグラーツ CEO の話を聴く。同社は暗号資産の投資や取引、資産運用、ベンチャー･ファイナンスに携わっている。氏は暗号資産に関与している信用度の高い投資家や金融機関の数がクリティカルマスに達した事実だけでも、正式な資産クラスとしての暗号資産の地位を確固たるものにしたと考えている。また、価格の乱高下にもかかわらず、現在の－FRB が主に資金を供給している社会問題への支出を停止する必要性を政府が感じていない－マクロ環境や政治情勢が続く限
り、ノボグラーツ氏が価値保存の便利な手段とみなすビットコ
インへの機関投資家の関心が薄れる様子はなく、暗号資産の採用は続くと考えている。
世界最大のデジタル資産運用会社、グレイスケール･インベス
トメントのマイケル･ソネンシャイン CEO も同様に、機関投資家はデジタル資産が普及するであろうことを今では概ね正しく認識しており、インフレや通貨下落へのヘッジ手段として、またはリスク調整後リターンの向上を追求するなかでのポートフ
ォリオ多様化手段として、ビットコインのような－非常に希少であることが検証可能な－資産の有限性にますます魅力を感じていると考えている。暗号資産の過去 1 年間の値動きは多様化
手段とは程遠かった—新型コロナウイルスのパンデミックが始まって以来、伝統的な資産以上に下落した—が、ソネンシャイ
ン氏は 2020 年の急速かつ力強い反発は資産クラスとしての弾力性を投資家に改めて保証するのみであったと述べている。
しかし、ビットコインのような—インカムも実用性もなく、ボ
ラティリティの高い—暗号資産を妥当な価値保存手段としているのは何なのだろうか。ノボグラーツ氏の答えは、そうであると｢信じるのを世界が認めた｣こと。ザック･パンドル(当社グローバル為替、金利、新興国投資戦略共同統括)もほぼ同意見
で、安全性やプライバシー、譲渡性といった性質に加え高いブランド力、またデジタルである事実からビットコインは将来の世代に適した価値保存手段となっており、社会で幅広く採用される可能性があると述べている。また、パンドルは現代の機関
投資家はビットコインを金のようなマクロ資産として扱うべきであると考えている。
当社コモディティ･アナリストのミハイル･スプロギスとコモデ
ィティ調査チームのグローバル統括ジェフ･カリーは暗号資産
は価値保存手段として機能しうるが、それも価値の創出と価格のボラティリティ緩和につながるような現実世界の用途を持つ場合に限られると述べている。この理由から、二人はブロック
Goldman Sachs Global Investment Research

チェーンがそうした用途の可能性を最大限に高めているイーサ(Ether)のような暗号資産がデジタルの主要な価値保存手段となるのに有利な立場にあると述べている。より広範には、暗号資産は正当性が立証されつつある情報およびネットワークの規模や成長から価値を引き出す新しい資産クラスだが、分散型という性質や匿名性から将来の成長には法的課題が大きく立ちはだかっているとカリーは主張している。
また、ニューヨーク大学スターン経営大学院のヌリエル･ルー
ビニ経済学教授は、インカムも実用性も経済のファンダメンタ
ルズとの関連性もない何かを価値保存手段、あるいはそもそも資産とみなせるという考えに真っ向から異議を唱えている。暗号資産を巡る最近の熱狂にもかかわらず、同教授は暗号資産のボラティリティやリスクを引き受けようとする大半の金融機関の意志を疑問視しており、最近の激しい価格変動はそのリスクをはっきりと思い出させる結果になったと考えている。
続いて、当社シニア･マルチアセット･ストラテジストのクリス
チャン･ミュラーグリスマンが、ポートフォリオに価値を付加するには暗号資産は魅力的なリスク/リワード、または他のマクロ資産との低相関、できればその両方を兼ね備えていることが望ましいとの考えを示す。標準的な米国の 60/40 ポートフォ
リオに 2014 年以降、ビットコインをわずかに組み入れると、S&P 500 や米国 10 年債よりも高いビットコインのリスク調整後リターンと、他の資産との相対的に低い相関がもたらす多様化
効果の両方により、強力なアウトパフォーマンスにつながることがわかった。だが、このアウトパフォーマンスの大半はごく限られたビットコイン独自の上昇に起因するため、ビットコイ
ンの短く、変動の激しい取引実績では、それがバランスト･ポートフォリオにどれだけの価値を付加できるか判断するのは早計であるとの結論に至った。
しかし、価値保存手段や投資可能な資産としての議論の余地の残る役割以外に、広範な暗号エコシステムは投資家に価値の上昇を約束してくれるのだろうか。暗号資産に無数の潜在的用途があることを踏まえ、ノボグラーツ氏とソネンシャイン氏はその答えがイエスであると強く信じている。特にノボグラーツ氏
は暗号エコシステムの 3 大進化—決済、分散型金融(DeFi)、非代替性トークン(NFTs)—が主にイーサリアム(Ethereum)ネット
ワーク上に構築されつつあり、これはイーサリアムや DeFi の様々なアプリケーションに多大な価格上昇余地があることを示唆していると考えている。しかし、ルービニ氏はブロックチェーン･テクノロジーのアプリケーションにほとんど成功例はな
いと主張する。さらに、企業がブロックチェーンを“BINO”—
Blockchain In Name Only(名ばかりのブロックチェーン)として利用する可能性は大きいとみている。要するに、ルービニ氏
は｢テクノロジーが信用の問題を解決できるという考えは妄想である｣という理由で、ブロックチェーン･テクノロジーが革命的と証明されることに懐疑的である。
次に、当社デジタル資産グローバル統括のマシュー･マクダー
モットが、当社が暗号資産に(再び)関わるようになった理由—
顧客の需要－と、暗号資産への関心が顧客の種類－ポートフォ
リオの多様化を求めるアセット･マネジャーから暗号資産の幅2Issue 98
El

広い使用例へのエクスポージャーをますます追及するようになった富裕層の顧客、主に現物のロングと先物のショートのベー
シスの差－今も残る市場へのアクセスの難しさを反映したアービトラージ－から利益を得ることを目指すヘッジファンド－でどのように異なるかを説明する。
最後に、この市場の分断問題以外に、機関投資家による暗号資産の採用拡大の妨げとなる他の要因を考える。規制当局が現
在、暗号資産をどのように考えているかをジェイ･クレイトン
前 SEC 委員長の元上級政策顧問で当社コンプライアンス部門のグローバル統括でもあったアラン･コーエン氏が説明する。ブロックチェーン調査会社チェインアリシスの共同創立者で CEOのマイケル･グロネガー氏は、暗号通貨の違法取引が全体の 1%

Goldman Sachs Global Investment Researchに満たないことを発見した同社の分析に何が含まれているか—
そして何が含まれていないか—を説明する。ソフトウエア･セキ
ュリティ会社トレイル･オブ･ビッツの共同創立者ダン･グイド
CEO は、暗号エコシステムの全投資家が知っておくべきテクノ
ロジーやセキュリティ上のブラックスワン･シナリオを論じる。

アリソン・ネーザン、編集者
Email: allison.nathan@gs.com
Tel:
212-357-7504
Goldman Sachs and Co. LLC

3

Issue 98

Interview with Michael Novogratz
El

Michael Novogratz is CEO of Galaxy Digital Holdings Ltd. Below, he discusses the potential for
crypto assets and their ability to transform the financial system and beyond.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: How does Galaxy
invest in the crypto universe?
Michael Novogratz: Galaxy Digitalgrew out of my family office, which
operates like a merchant bank, andhas become a nearly full-service
business for the digital asset andblockchain technology communities.
Being involved across the ecosystem
is important to us, namely so that we can be positioned to help
grow the industry that we believe will transform the way welive and work globally. We own and trade coins, have a large
venture business, and invest in the virtual world that will be
used not by finance, but by consumers—the metaverse,
gaming studios, and non-fungible token (NFT) projects. We
believe you learn by being at the frontier and that’s why westarted the company—to learn about the crypto space andshare that knowledge with our institutional customers as wecreate the next generation of financial services companies.
Allison Nathan: You’ve been involved in and excited about
the crypto space for a while now, but it’s had fits andstarts, including the dramatic price rise and collapse in
2017/18. What makes this time different?
Michael Novogratz: 2017/2018 was the first-ever truly global
and retail-driven speculative mania. It was blind excitement. It’s
not that there are no excesses, knuckleheaded Twittercomments, cheerleading, or tribalism today, but that’s all there
was back then. And crypto’s market cap cratered 98.5%. Butout of that mania grew a much smarter investor base that took
the lessons learned and is more willing to differentiate between
the different use cases for crypto—from stores of value todecentralized finance (DeFi) to stablecoins and payment
systems. And in turn, the community has built up a more logicalinvestment process.
Importantly, that price downturn didn’t result in a downturn ininvestments being made in the underlying crypto infrastructure,so the custody and security infrastructure necessary to attract
institutions has been built. As a result, we’ve now hit a criticalmass of institutional engagement. Everyone from the majorbanks to PayPal and Square is getting more involved, which is a
loud and clear signal that crypto is now an official asset class.
There’s still a lot of volatility, so people will wash in and out.
But crypto is not going away. And a core group of crypto people
see this as—and I quote the Blues Brothers here —“a mission
from god”. They want to rebuild the infrastructure of thefinancial markets in a way that’s more transparent andegalitarian and doesn’t rely on governments who make bad
decisions with our finances. They will never sell. And becauseof that, bitcoin and ether can’t go to zero.

Allison Nathan: But can the crypto ecosystem survive if it
isn’t intertwined with the traditional financial system?
Michael Novogratz: No. Institutions need to participate
because they have most of the money in the world and there’s
actually a symbiotic relationship between the two. The advisor
model that Galaxy possesses is important because many
people don’t have time to learn to become investors. And as
traditional financial advisors and asset managers understandthe space and become crypto preachers, they bring more
people into the tent, which is key for the future of crypto.
That said, payments will be an interesting battleground. The
money transfer business is a very high margin one for legacy
financial institutions and it’s under threat from new payment
systems that are faster, more transparent, and cheaper.
Facebook is coming out with their Dollar-based payment
system, the Chinese government is coming out with theirs, andstablecoins are gaining traction. At some point, I believe ourphones will have crypto wallets that will replace bank accounts.
The competition to see who dominates payments is juststarting along with the competition between exchanges andderivative markets. So the question is, how fast will banks
iterate and compete?

A core group of crypto people see thisas—and I quote the Blues Brothers here —“a mission from god”… They will never sell.
And because of that, bitcoin and ether can’t
go to zero.”
Allison Nathan: But will it be bitcoin that’s transformativein payments?
Michael Novogratz: No. Bitcoin isn't set up to process
thousands of transactions per second. Paying for a diet cokewith bitcoin would be like paying for it with gold. That won’t
happen. But payment rails will be built on other blockchains.
Right now, if I want to send money to my sister in Holland, itwould be painful, costly, and slow. But soon, I’ll be able to send
her a Dollar stablecoin and transferring money will become
free. Most of this will be built on the Ethereum network, which
is why ethereum prices have been rising. The three biggest
moves in the crypto ecosystem—payments, DeFi, and NFTs—
are mostly being built on Ethereum, so it’s going to get priced
like a network. The more people that use it and the more stuff
that gets built on it, the higher the price will ultimately go.
Allison Nathan: What’s the value proposition of bitcoin,then?
Michael Novogratz: Bitcoin is a really convenient way to store
value. One of the main reasons people have gotten excitedabout bitcoin recently is that they’re worried that we currently
have an unsustainable balance of monetary and fiscal policy

Goldman Sachs Global Investment Research4Issue 98
Elthat will eventually set off an inflationary spiral. And that worry
isn’t going away anytime soon. More and more Americans arein favor of paying for college for people whose families earn
less than $100k annually. President Biden just gave half of the$1.9tn fiscal package directly to people who needed it, which
was very well-received. Some version of universal basic income(UBI) is coming; it may not be called UBI, but capital will betaxed and given to labor. None of that is fiscally prudent, butthere’s no political imperative to say stop spending money.
Even before COVID-19, deficits were bad, but now they’re
insane. And monetary policymakers are financing everything
the government wants to spend, not just in the US but all over
the world. So the main reason everyone got into bitcoin is thesame reason they got into gold—the current macro backdrop is
tailor-made for it. And, as long as that macro and political
backdrop persists and crypto remains in the adoption cycle, it’s
crazy to get out.

The three biggest moves in the crypto
ecosystem—payments, DeFi, and NFTs—aremostly being built on Ethereum, so it’s goingto get priced like a network. The more people
that use it, the more stuff that gets built on it,
and the higher the price will ultimately go.”Allison Nathan: But why is bitcoin, which has no income
and no other uses, a good store of value?
Michael Novogratz: Bitcoin is one of the few uniform storesof value in the world. It’s the most widely distributed asset inhistory outside of the Dollar and Euro; 140 million people own
some bitcoin. And it’s easily stored and transported, unlike
gold. Stores of value are social constructs—they have value
because we believe they do. There has never been a more
successful brand created in such a short period of time. It’s likethey floated the baby in the river and the community raised thebaby, and now it’s worth around $1tn. Today, it’s recognizedand believed in by exceptionally credible people. So the world
has voted that they believe bitcoin is a store of value. People
still make stubborn arguments against it, but every single bankwe know of is building a wealth channel for crypto, 14 entities
have bitcoin ETFs in line at the SEC, and most tech companies
are building bitcoin into their wallet and interface. To think
we’re going to have less people believing in bitcoin isn’t logical.
Allison Nathan: Haven’t people been buying bitcoin andother cryptos just because their prices were rising?
Michael Novogratz: Of course that’s part of the equation.
People in general are momentum investors. All great fortunes
on this planet have been made by trends—I learned that fromPaul Tudor Jones thirty years ago and Jeff Bezos and Bill Gates
are proof points to this as well. Bitcoin adoption and the macro
factors behind it are a mega bull trend.
Allison Nathan: So what are the remaining roadblocks tofurther institutional adoption?
Michael Novogratz: Institutions need a little more regulatory
clarity, which they’ll likely get soon. Former SEC Chair Jay
Goldman Sachs Global Investment Research

Clayton didn’t want crypto to be his legacy, and so he punted.
But Gary Gensler is very knowledgeable about and interested in
the crypto space. Within his first nine months, a clear
regulatory framework will likely emerge that will make it easierfor institutions to get involved. For example, institutions have a
hard time using DeFi products right now due to uncertainty
around how Know Your Customer (KYC) requirements areapplied to smart contracts and DeFi companies that arecomprised of code. With a little more innovation and regulator
understanding over the next few years, DeFi protocols andprojects will probably explode. Uniswap could become a bigger
exchange than the CME or the NYSE which will pull people in.
More clarity on the tax side would also be helpful. But
policymakers today are rational and have high intellectual
integrity, so I don’t see them singling out cryptocurrencies anddo expect they will be taxed like any other asset. I’m much
more confident than I’ve ever been that this is inevitable.
Allison Nathan: What do you make about the rise of
Dogecoin and other meme coins?
Michael Novogratz: Dogecoin is a very speculative asset,
much more so than bitcoin. It likely doesn’t have long-term legs
because no institution is buying it and at some point, retail willlose interest. Dogecoin started as a joke and grew for two
reasons. First and foremost is tribalism in the investing
community. It’s the same thing we saw with the rise in
GameStop, which was driven by a young community ofinvestors who have been empowered as financial players
through trading apps and social media platforms. Second, value
is showing up in new places because the government isprinting a lot of money. It’s important to keep that in mind
when thinking about some crypto assets and equities like
GameStop that have short-term potential but no long-term
viability.

People in general are momentum
investors. All great fortunes on this planet
have been made by trends… Bitcoin adoption
and the macro factors behind it are a megabull trend.”
Allison Nathan: What would make enthusiasm for theasset class diminish?
Michael Novogratz: I am not sure what could dent enthusiasm
for the broader ecosystem at this point. But, at least for bitcoin,
the biggest risk in this cycle is, in the words of Ray Dalio, abeautiful de-leveraging. If the Fed successfully taps the brakes,
pulls back liquidity, and slows the economy down just enoughto ensure inflation doesn’t run away and deficits come down,then the impetus for having a store of value will fall. But this is
the hardest macro environment policymakers have ever dealt
with, and only a tiny window exists to get it right. And even if
they do, bitcoin won’t just collapse into oblivion. Why has gold
been a mediocre asset to own this year and bitcoin’s generally
been a great one? Because gold isn’t in the adoption cycle.
Bitcoin is.

5Issue 98

Cryptos: sizing the surge
El

Bitcoin and ether have performed strongly YTD

And other cryptocurrencies have seen even larger rallies

Total returns YTD, %Total returns YTD, %

300

700

250

600

200
150

500

100

14,00012,00010,000

400

50

8,000

0

German 30y

US 30yUS 10yEUR/USD

GSCI Gold

Topix

US HY

MXAPJ

MSCI EM

S&P 500

MSCI World

Stoxx 600

GSCI Ind Metals

Bitcoin

10y Inflation

GSCI Energy

300
Ether

-50

16,000

Bitcoin (lhs)
Ether (lhs)
Litecoin (lhs)
XRP (lhs)
Dogecoin (rhs)

6,000

200

4,000

100
0
Jan-21

2,000
Feb-21

Mar-21

Apr-21

May-210Note: Total returns in USD; all market prices as of May 19, 2021.
Source: Bloomberg, Goldman Sachs GIR.

Note: Total returns in USD.
Source: Bloomberg, Goldman Sachs GIR.

But crypto returns remain very volatile

Activity on Bitcoin and Ethereum networks is around 2018 highs
Total active addresses, million

Average daily volatility in ann. terms, %5 Bitcoin. Ethereum

1.4

Ether

1.2

Bitcoin

1.0

Oil
Silver0.8

Nasdaq

0.6

S&P 500

0.4

Gold
US 10y0.2

DXY(USD index)
0

20

60

40

80

100

0.0
2015

2016

2017

2018

2019

2020

2021

Note: Based on returns since 2014 and since 2015 for ether.
Source: Bloomberg, Goldman Sachs GIR.

Note: Includes unique addresses active in the network as a sender or receiver.
Source: Glassnode, Goldman Sachs GIR.

The market cap of bitcoin had surged above $1tn

Around 70% of bitcoin and 85% of ether is held in profit today

Crypto market cap. vs private investment gold stock, $tn

Percent of total supply in the network with positive balance, %3.0

Bitcoin

Ether

100

Gold

90

2.5

80
70

2.0

60
1.5

50
40

1.0

30

0.5
0.0
2015

2016

2017

2018

2019

2020

2021

Note: Private investment gold stock based on ETFs and bars/coins held privately.
Source: World Gold Council, CoinMarketCap, Goldman Sachs GIR.
Goldman Sachs Global Investment Research

20

Bitcoin

10

Ether

0
2016

2017

2018

2019

2020

2021

Note: The percentage of circulating supply bought below the current market price.
See more detail here; as of May 19. 2021.
Source: Glassnode, Goldman Sachs GIR.
6

Goldman Sachs Global Investment ResearchApr-13

Jul-13Oct-13October 2013
April 2013
US law
Mt. Gox exchange
enforcement
goes down for a day. officials shut down
the Silk Road.

March 2013
FinCen says that BTC will betreated in the same way as money
for the purposes of AML laws.

Apr-18Jan-14Jul-18

Jul-14

April 2014
Reports indicate that the
PBOC plans to shut down
the bank accounts ofChinese BTC exchanges.

Apr-14

February 2014
Attacks on
exchanges lead toa halt on somewithdrawals;
Mt. Gox exchange
collapses.

January 2014
Zynga and Overstock.com
begin accepting BTC.

Jan-18July 2019
US Congress
holds hearings on
cryptocurrency
regulation.

Oct-14Oct-18Apr-19Jan-15

Jul-19Jul-15Jan-20Jul-20Jan-16

Apr-16

Jul-16Oct-16

October 2015
The EU decides not to impose a value-added tax (VAT) on cryptotransactions, effectively regulating BTC (and othercryptocurrencies) in the same way as fiat currencies.

Oct-15

Apr-21

August 2016
Bitfinex, the largest
BTC exchange by
volume, is hacked;
cybercriminals
capture $72m
worth of BTC.

Jan-21February 2021
Tesla announces $1.5bn
BTC position andacceptance as payment;
BNY Mellon announces itwill custody BTC.

July 2016
The reward for BTC
miners halves for thesecond time, falling from
25BTC to 12.5BTC.

Oct-20February 2020
Treasury Sec. Yellen
warns of illicit financing
via cryptocurrencies.

February 2016
Influential members in
the BTC community
meet in Hong Kong todiscuss a possible
change in BTC'stransaction format thatwould effectively
increase the size of BTC
blocks; the aim is to
speed up transaction
processing times.

Apr-20January 2020
CME begins to
trade options on
BTC futurescontracts.

September 2015
The US Commodity
Futures Trading
Commission (CFTC)
defines BTC as acommodity, which falls
under its regulatory
purview.

Oct-19September 2019
NYSE launches
BTC futures.

May 2021
Tesla announces itwill no longer accept
bitcoin; China widens
crypto regs.
April 2021
BTC corrects driven
by liquidations, China
mining outage, andregulatory concerns.

August 2020
April 2021
MicroStrategy
Coinbase IPO.
announces adoption of
BTC as primary
Treasury reserve
February 2021
asset.
NY AG $18.5mn
Tethersettlement.

October 2020
PayPal toaccept BTC;
July 2020
SquareUS Office of theannounces
Comptroller of the$50mn BTC
Currency (OCC)
investment,
allows nationallyacceptance aschartered banks
payment.
to custody
cryptocurrencies.

May 2020
The reward for BTC miners
halves for the third time,
falling from 12.5BTC to
6.25BTC; investor Paul
Tudor Jones announces
BTC holdings.
November 2019
People's Bank of China
launches crackdown on
cryptocurrencies.

June 2015
The New York State
Department of
Financial Services
unveils the first set ofstate-level regulations
targeting
cryptocurrencies.

Apr-15January 2015
Coinbase launches
its own USlicensed BTC
exchange (GDAX).

Jan-19October 2018
May 2018
Fidelity announces
US DOJ opens criminal probe
initiative to handle trading
into cryptocurrency priceand custody of crypto
manipulation; US and Canadianassets for institutional
regulators announce "Operation
investors.
Crypto-Sweep" to police crypto
July 2019
investment schemes.
President Trump tweets that
July 2018
BTC and other
SEC rejects
cryptocurrencies are "based
application foron thin air".
BTC ETF.

January 2018
Chinese officials order mining operations to close;
hackers steal more than $500mn of XEM—anothercrypto—from the Japanese exchange, Coincheck.

December 2017
BTC futures contracts begin
trading on the CBOE and CME
exchanges.

Note: Market pricing as of May 19, 2021.
Source: CoinDesk, 99bitcoins, Bloomberg, various news sources, Goldman Sachs GIR.

$0
Jan-13Oct-17

December 2013Media attention
pushes BTC to an alltime high.

Jul-17

March 2013
An accidental fork occurs in the BTC
blockchain; due to the introduction ofa flawed software update, the correct
version of the public ledger becomes
unclear for nearly 6 hours.

After being unveiledin 2009, BTC's priceremains relatively
flat, peaking at about$30 in 2011.

Apr-17

April 2017
Japan recognizes BTC aslegal tender, while bringing
the cryptocurrency under
AML/KYC rules andregulations.

September 2017
The Chinese
government bans
ICOs and
subsequently
closes thenation's BTC
exchanges.

November 2017
Future Fed chair
Jerome Powellsays BTC is not
big enough topose a threat to
the US economy.

5
.

$200

$400

$600

$800

$1,000$1,2002013-2016

August 2017
A "hard fork" occurs as
Bitcoin Cash (BCH)
splits off of BTC; BCH
promises speedierprocessing times, as its
blocks contain 8x thedata capacity of BTC
blocks.

March 2017
The SEC rejects two
separate BTC ETF
applications.

$0
Jan-17$5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000$55,000$60,000$65,0002017-2021

Issue 98

El

Tracking bitcoin’s volatile ride7

Issue 98

Interview with Nouriel Roubini
El

Nouriel Roubini is a professor of economics at New York University’s Stern School ofBusiness. He is CEO of Roubini Macro Associates, LLC, a global macroeconomic consultancy
firm. Below, he discusses his skepticism about the value of cryptocurrencies and their ability toradically transform the financial system.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: Why do you think
bitcoin and other cryptocurrencies
are in a bubble?
Nouriel Roubini: To start, calling themcurrencies is a misnomer. Currencies
must have four qualities: they must bea unit of account, a means of payment,a stable store of value, and act as asingle numeraire. Bitcoin and mostother cryptocurrencies have none of these features. It's not aunit of account; nothing is priced in bitcoin. It's not a scalable
means of payment; the Bitcoin network can only complete
seven transactions per second, versus the Visa network thatcan conduct 65,000. It's not a stable store of value for goods
and services; even the crypto conferences I've attended don't
accept bitcoin for payment because the price volatility could
wipe out their profit margin overnight. And the crypto universe
doesn’t offer a single numeraire in which the prices of different
items can be denominated because there are thousands oftokens and thus limited price transparency. Even the
Flintstones had a more sophisticated system by using shells asa single numeraire to compare the price of different goods.
Bitcoin and other cryptocurrencies also aren't assets. Assets
have some cash flow or utility that can be used to determine
their fundamental value. A stock provides dividends that can be
discounted to arrive at a valuation. Bonds provide a coupon,loans provide interest, and real estate provides rent or housing
services. Commodities like oil and copper can be used directly
in different ways. And gold is used in industry, jewelry, and hashistorically been a stable store of value against a variety of tailrisks, including inflation, currency debasement, financial crisis,and political and geopolitical risk. Bitcoin and othercryptocurrencies have no income or utility, so there's just no
way to arrive at a fundamental value. A bubble occurs when theprice of something is way above its fundamental value. But wecan’t even determine the fundamental value of these
cryptocurrencies, and yet their prices have run up dramatically.
In that sense, this looks like a bubble to me.
Allison Nathan: Why are more institutions interested ingetting involved in cryptocurrencies if they are in a bubble,
and will this help stabilize and credentialize the market?
Nouriel Roubini: Given the large trading volumes, it pays tofacilitate trading activity, custodial services, etc. But do
institutional investors really want to get more involved? Maybesome do, but I don’t see it becoming mainstream. There's anargument that because only a fraction of institutional money iscurrently invested in bitcoin relative to gold, the price of bitcoin
could go to the moon as a result of asset re-allocation fromgold. But I'm doubtful institutions want exposure to an asset
that can drop by 15% overnight. There's also always the risk
Goldman Sachs Global Investment Researchthat something else backed by real assets might end up
completely replacing bitcoin as an alternative store of value.
Bitcoin could disappear one day, but gold won’t. And the idea ofcorporate treasurers allocating to crypto assets is totally crazy.
No serious company would do that because treasury accounts
must be invested in stable assets with minimal risk, even if they
provide a very low return. Any treasurer who invests insomething that falls 15% in value overnight will be fired. Sure,Elon Musk can do it because he's the boss, although he’s since
backtracked somewhat on bitcoin due to environmental
concerns. But few other people are in that position.
Allison Nathan: But didn’t gold also have highly volatile
periods before it matured as an institutional asset?
Nouriel Roubini: While gold has experienced periods ofvolatility, a set of economic fundamentals generally drove thoseprice swings. Gold rises with inflation and inflation expectations
because it’s an inflation hedge, and it falls when the Fed
tightens monetary policy and rates rise, not just in nominal but
also in real terms, for the same reason. Gold is inversely related
to the value of the Dollar, because a falling Dollar leads tohigher commodity production costs and prices, including forgold. When there's serious political or geopolitical risk or afinancial crisis, the value of gold rises because it serves as asafe haven asset, as does the Swiss Franc, the Japanese Yen
and US Treasuries. A whole set of variables can be used todetermine the demand for gold relative to its supply, whichmakes it possible to establish a fundamental price. In contrast,
the prices of bitcoin and other cryptos don’t have a consistent
relationship with economic fundamentals that explains theirvolatility or suggests it will eventually subside.
Allison Nathan: But couldn’t bitcoin serve as an inflation
hedge similar to gold given that it doesn't have exposure to
currency debasement?
Nouriel Roubini: It's true that inflation and inflation
expectations have moved higher, the Dollar has started to
weaken, and US breakevens are now well above 2%. But while
the price of gold and other inflation hedges has reflected theseshifts to a limited extent, at their peak, bitcoin’s price had
increased by more than tenfold from a low of $5K to more than
$60K in a year. That can't be explained by a fear of currency
debasement, because if there was really such a strong worry,gold and other assets like TIPS would likely have rallied more.
So, something else must account for the rise in bitcoin andother crypto prices.
Does bitcoin offer protection against debasement? At least
among the cryptos, it can't be debased because a cryptographic
rule determines the increase in supply and caps total supply at
21mn. But just because something is scarce doesn't mean it
has fundamental value. It's not difficult to create somethingwith limited supply, and there's no reason artificial scarcity is
8Issue 98
Elvaluable in and of itself. Beyond bitcoin, the supply of mostcryptocurrencies is determined by a bunch of whales andinsiders based on random rules that can be used to increase
supply ad-hoc. And their supply has actually increased at amuch faster rate than the balance sheet of any central bankgiven the proliferation of the number of coins. Scarcity alsodoesn't make something a reliable store of value. It took ahundred years for the value of the Dollar to fall by 90% in realterms. In 2018, it only took 12 months for thousands ofcryptocurrencies to lose the same amount of value, and evenbitcoin fell by more than 80%. That's currency debasement.
Bitcoin isn't even a reliable hedge for risk-off events, let alone
inflation shocks. It's actually highly pro-cyclical. During the peakof the COVID-19 shock in early 2020, US equities fell by about
35%, but bitcoin collapsed by around 50%. Other top 10 crypto
currencies fell by even more. In difficult times, crypto assets
don't go up; they go down. If investors want inflation hedges, awide variety of assets have proven to be good inflation hedges
for decades, including commodities and their stocks, gold, TIPS,
inflation-adjusted and other forms of inflation-indexed bonds. I
do worry that monetized deficits might eventually lead to fiscal
dominance and higher inflation. But I wouldn't recommend
bitcoin or other cryptocurrencies to protect against this risk.
Allison Nathan: Nascent technologies are often volatile intheir adoption phase. What makes this moment for crypto
any different than the early days of the internet?
Nouriel Roubini: More than a decade on from the advent of
Bitcoin, it's nowhere near as transformative as the internet was
at a similar stage. The World Wide Web already had around abillion users ten years in. While it's difficult to know the total
number of crypto users today, active users for the most tradedcoins probably amount to a maximum of a hundred million.
Transaction growth for cryptocurrencies has been slower thanin the case of the internet, and transaction costs remain very
high, with mining revenues as a share of the total volume oftransactions still very high. After ten years of the internet, there
was email, millions of useful websites and apps, andtechnologies like the TCP and HTML protocols with broader
applications. In the case of cryptocurrencies, there are so-called"dApps", or decentralized apps, but 75% of dApps are games
like CryptoKitties or literally pyramid or Ponzi schemes of one
sort or another. And the other 25% are "DEXs", or decentralizedexchanges, that for now have few transactions and little
liquidity. So the comparison with the internet just doesn't ringtrue.
Allison Nathan: Doesn’t the concept of decentralized
ledgers and networks have value, though?
Nouriel Roubini: I am not sure it does, but the reality is thatthe crypto ecosystem is not decentralized. An oligopoly ofminers essentially controls about 70-80% of bitcoin and ether
mining. These miners are located in places like China, Russia,
and Belarus, which are strategic rivals of the US and have a
different rule of law. That's why the US National Security
Council is starting to worry about the risks that could pose for
the United States. And 99% of all crypto transactions occur oncentralized exchanges. Many crypto currencies also have aconcentrated group of core developers who are police, judge,
and jury whenever updates to or conflicts over the blockchain
Goldman Sachs Global Investment Researcharise. Rules assumed to be fixed have been changed in thesesituations. So the blockchain isn't even immutable.
There’s some evidence that the ownership of crypto wealth isalso highly concentrated. Less than 0.5% of addresses own
around 85% of all bitcoin, based on CoinMarketCap data.
There's also evidence that whales holding a large amount of thetotal supply of bitcoin and other cryptocurrencies actively
manipulate their prices. Tons of news articles have detailed
active manipulation in chat rooms in the form of pump-anddump schemes, spoofing, wash trading, front-running, etc. Thisbehavior is much worse than even penny stocks, whichsuggests a high likelihood of an eventual regulatory crackdown.
Allison Nathan: Does any innovation in the crypto
ecosystem look promising to you?
Nouriel Roubini: Not really. The next decade will see radical
financial innovation across many dimensions, disrupting the
traditional financial system. But it will have nothing to do withcryptocurrencies. Driving this innovation will be a revolution in
fintech owing to some combination of AI, machine learning, andthe use of the Internet of Things (IoT) to collect big data.
Fintech is already transforming payment systems, borrowing
and lending, credit allocation, insurance, asset management,
and parts of the capital markets. In the context of payment
systems, billions of transactions are made every day using
AliPay and WeChat Pay in China, M-Pesa in Kenya and most of
Sub-Saharan Africa, and Venmo, PayPal, and Square in the
United States. These are all great companies that are scalable,
secure, and are disrupting financial services. They're not basedon decentralized finance (DeFi), and have nothing to do withcrypto or blockchain.
I’ve honestly spent a lot of time looking at this because more
and more people are saying that while maybe these aren't
currencies, blockchain technology could be revolutionary. There
are now all these buzzwords like "enterprise distributed ledger
technology (DLT)" or "corporate blockchain." But I call most ofthese projects BINO—"Blockchain In Name Only". Something
truly based on blockchain technology should be public,
decentralized, permissionless, and trustless. But looking at DLT
and corporate blockchain experiments, almost all of them are
private, centralized and permissioned—because a small groupof people has the ability to validate transactions—and most areauthenticated by a trusted institution.
And even among these projects, few have actually worked.
One study looking at 43 applications of blockchain technologies
in the non-profit sphere for reasons such as banking theunbanked, giving IDs to refugees, and transferring remittances
found that zero actually worked. The fundamental problem withthis whole space is that it assumes the idea that technology cancreate trust. But that's mission impossible. Resolving thechallenge of authenticating ownership or quality requires due
diligence and testing. Why should I trust a DLT that says mytomatoes are organic? I trust Whole Foods that actually tests
the tomatoes for chemicals. The idea that technology canresolve the question of trust is delusional. So, I'm deeply
skeptical that blockchain, DLT, and cryptocurrencies for thatmatter will be the revolutionary technologies that their
proponents suggest.
9

Issue 98

Bitcoin as a macro asset
El

Zach Pandl argues that institutional investors
should treat bitcoin as a macro asset, akin togold, going through a social adoption phase
Although bitcoin is now seeing wider institutional adoption,
many sophisticated investors still struggle to understand why adigital asset should have any value—much less a market
capitalization of more than $500bn. And because of theparabolic price increases and high retail participation, many treat
the cryptocurrency phenomenon as a classic speculative mania
or “bubble”. Regardless of whether bitcoin will prove to be agood investment over time, this perspective is too narrow.
Bitcoin is a medium which is beginning to serve the functionsof money—primarily as a “store of value”. Virtually anything canserve this purpose as long as it gains widespread social adoption,and bitcoin has made meaningful progress down that path.

objects has functioned as money, dictated by the demands ofplace and time—as Bitcoiners and monetary historians are fondof pointing out. Classic examples include the tobacco-based
money standards of the early American colonies, and theregular use of mobile phone minutes as money throughout
Africa. Gold serves a money function today primarily as an
artifact of history, not because it is literally the best possible
medium for society’s store of value needs.

Gold plays an important diversification role in portfolios
10-year annualized returns

40

S&P 500

Gold

30
20
10

The need for stores of value
To understand bitcoin, it is best to begin with gold. Gold servesa unique function in the global financial system. It is both auseful commodity and a money-like, “store of value” asset.
However, unlike conventional money mediums, it is not issued
by a government and does not denominate any transactions ingoods or assets. In effect, gold serves as an alternative fallback
money instrument for adverse states of the world—when
investors are unsure about the safety of conventional assets or
fiat money in general (e.g. due to the risk of inflation orconfiscation). In foreign exchange markets, gold behaves like an“inverse currency”: its price tends to fall when thefundamentals of major currencies improve, and tends to risewhen the fundamentals of major currencies worsen. Over time,the most important driver of nominal exchange rates is therelative rate of inflation between two economies. Because gold
has a quasi-fixed supply, its nominal value tends to rise at therate of inflation in major markets. These correlation and store ofvalue properties allow gold to play a very useful diversificationrole in portfolios.
Originally, gold was likely adopted as a money medium due toits elemental properties. Gold and copper are the only metals
which are not greyish in color in their natural state 1, and they
have captivated humans since ancient times. Gold is also
relatively dense, malleable, and ductile (stretchable), and unlike
many other metals it does not tarnish, rust, or corrode. Thesefeatures have underpinned gold’s use as a money instrument
throughout human history.
0F

But the use of gold today has as much to do with inertia as it
does with the metal’s physical properties. After all, US Dollar
notes are also a store of value, and they are made of paper 2.
Money, like language, is a social device—it is closer to aconcept than a thing. Money is a social device that facilitatescommerce, in much the same way that language is a social
device that facilitates other aspects of our lives. It is useful forsociety to have a type of money that is not issued by asovereign government. But the specific medium used for that
purpose is partly arbitrary. Throughout history, a diverse array of
1F

1
2

0
-10
1960 1967 1974 1981 1988 1995 2002 2009 2016
Source: Bloomberg, MeasuringWorth, Goldman Sachs GIR.

When inflation accelerated in the mid-20th century and investorssought out options to protect the real value of their assets, gold
was the natural choice. At the time, major currencies were
pegged to gold via the US Dollar through the Bretton Woods
gold exchange standard, and, before the Great Depression,
most currencies, as well as most US Treasury notes, weredirectly backed by gold. The US government provided an official
price of gold in Dollars, which changed only twice in the nearly
two centuries between the 1790s and 1970s. During the 1960s,
under the gold exchange standard, gold trading above its official
stated price was the clearest way to observe depreciationpressure on the US Dollar. In short, over much of the postWWII period, there was a close association between the priceof gold, currency stability, and the real value of money—making
it the obvious inflation hedge for portfolios.
But the official link between the Dollar and the price of gold
was severed 50 years ago when President Nixon ended theconvertibility of Dollars into gold in August 1971. As a result, ageneration of asset holders have grown up in a world without atight connection between gold and money. So when the needfor a store of value asset arises, could it be that they reach forsomething else?
Gold for the digital generation
This is where bitcoin comes in. Any alternative medium would
need to be secure, privately held, have a fixed or quasi-fixed
supply, and be transferable, ideally outside the traditional
payments system. In our modern globalized society, where asubstantial portion of social interaction and commerce occurs
online (especially among younger people), it may also need tobe digital. But, most importantly, it would need to have thepotential for widespread social adoption—anything can bemoney, as long as it has that. Bitcoin is therefore a plausible

Gold’s periodic symbol AU comes from the Latin word aurum, meaning “shining dawn.”
Technically a 75% cotton-based and 25% linen-based material.

Goldman Sachs Global Investment Research10Issue 98Elalternative store of value medium to gold and, at the moment,
the best candidate among cryptocurrencies with a similar structure
because of its broader social adoption (i.e. its “name brand”).
In equilibrium, a store of value as volatile as bitcoin would not
be very useful. But cryptocurrencies are in their infancy; it isbetter to think of today’s prices as reflecting some probability
that bitcoin or another coin/token could achieve greater
adoption in the future, at which time its price could be
extremely high. Therefore, small changes in those probabilities
can result in high price volatility today. Bitcoin investors are
speculating that it will eventually achieve near-universal
acceptance as a non-sovereign money, with high returns (andhigh volatility) along the way.

Today’s bitcoin prices reflect some probability that cryptos
could achieve greater adoption in the futureTime (x-axis) vs. price (y-axis)

bitcoin is going through a one-time social adoption phase—
which may succeed or fail. When social adoption is rising,bitcoin should offer superior returns compared to gold. Whensocial adoption is declining (e.g. due to adverse regulatorychanges), bitcoin will likely offer inferior returns compared togold. Because of the speculative nature of the asset class andhigh uncertainty around valuation, investors should be preparedfor prices to overshoot fundamentals in both directions. While
bitcoin has generally appreciated in value over time, there havealready been several waves of speculative excess followed bylarge drawdowns.

Bitcoin behaved like gold following the March FOMC
announcement
Prices on March 17, 2021, $

1,755
1,750
1,745
1,740

Successful
Adoption

1,735

Where we aretoday

58,500Gold (lhs)

58,000

Bitcoin (rhs)

57,500

FOMC
announcement

56,50057,00056,00055,5001,730
FailedAdoption

55,0001,725

54,500Source: Bloomberg, Goldman Sachs GIR.
Source: Goldman Sachs GIR.

The critical ingredient to bitcoin’s success—widespread social
adoption—has now crossed many notable thresholds: Tesla,
the sixth largest company in the S&P 500, is carrying bitcoin on
its balance sheet; storied macro hedge fund Brevan Howard
has begun investing in cryptocurrencies; and Coinbase is now
listed on the Nasdaq. Other blockchain networks, especially
Ethereum, are developing decentralized banking platforms,
Facebook is expected to introduce its stablecoin Diem later thisyear, and many central banks are exploring distributed ledger
technology for their own digital currencies. Whether bitcoin will
succeed as a store of value in the long run remains an open
question—and its consumption of real resources may be aheadwind over time—but for now social adoption of
cryptocurrencies appears to be moving forward.
Bitcoin as a macro asset
Bitcoin has also matured enough that its price behavior
resembles that of other macro assets. For example, at its
March 17th meeting, the Federal Reserve said that mostpolicymakers did not expect to raise interest rates until after
2023—later than financial markets had expected. Macro assets
reacted in the conventional way to a “dovish policy shock”:
shorter-maturity Treasury yields declined, the yield curve
steepened, the Dollar fell, and stock prices increased. Bitcoinrose, just like gold, but with about four times the volatility.
Investors should treat bitcoin in this way. Gold is a commoditythat serves a money function and behaves like a currency.
Bitcoin is exactly the same, even though it is a digitalcommodity created through cryptography, rather than a physicalcommodity found in the Earth’s crust. From a markets
standpoint, the main difference between the two assets is that
Goldman Sachs Global Investment ResearchTechnological issues aside, the current macroeconomic outlook
appears favorable for store of value assets, whether physical ordigital. The Federal Reserve has adopted a more ambitious
labor market goal of “broad and inclusive” full employment, andseems more tolerant of above-target inflation than in the recent
past. Our economists expect real cash yields to remain negativeacross developed market economies for a number of years tocome. Equity market multiples are at historic highs. Many
developing countries will struggle with the fiscal hangover fromthe COVID-19 crisis for years to come. In this environment,
unless investors can find other sources of real returns, demand
for assets that protect purchasing power should remain high.

Low real interest rates should support high demand for“store of value” assets over the next several years%

6

Core Inflation

5

Fed Funds Rate

Real Rate
Forecast

4
3
2
1
0
-1
-2

Mar-04 Mar-07 Mar-10 Mar-13 Mar-16 Mar-19 Mar-22

Source: Goldman Sachs GIR.

Zach Pandl, Co-Head of Global FX, Rates, EM Strategy
Email:
Tel:zach.pandl@gs.com
212-902-5699

Goldman Sachs and Co. LLC

11

Issue 98

Crypto is its own class of asset
El

Jeff Currie argues that cryptos are a newclass of asset that derive their value from theinformation being verified and the size andgrowth of their networks, but legal challenges
loom large
The term “cryptocurrencies”—which most people take to meanthat crypto assets act as a digital medium of exchange, like fiat
currency—is fundamentally misleading when it comes toassessing the value of these assets. Indeed, the blockchain that
underlies bitcoin was not designed to replace a fiat currency—it
is a trusted peer-to-peer payments network. As a cryptographic
algorithm generates the proof that the payment was correctly
executed, no third party is needed to verify the transaction. The
blockchain and its native coin were therefore designed toreplace the banking system and others like insurance that
require a trusted intermediary today, not the Dollar. In thatsense, the blockchain is differentiated from other “digital”
transactional mechanisms such as PayPal, which is dependent
upon the banking system to prevent fraud like double-spending.
In order to be trustworthy, the system needed to create an
asset that had no liabilities or contingent claims, which can only
be a real asset just like a commodity. And to achieve that,blockchain technologies used scarcity in natural resources—oil,gas, coal, uranium and hydro—through ever-increasing
computational-power consumption to “mine” a bit version of anatural resource.
From this perspective, the intrinsic value of the network is thetrustworthy information that the blockchain produces throughits mining process, and the coins native to the network arerequired to unlock this trusted information, and make it
tradeable and fungible. It’s therefore impossible to say that the
network has value and a role in society without saying that thecoin does too. And the value of the coin is dependent upon thevalue and growth of the network.
That said, because the network is decentralized andanonymous, legal challenges facing future growth for crypto
assets loom large. Coins trying to displace the Dollar run
headlong into anti-money laundering laws (AML), as exemplified
by the recent ransoms demanded in bitcoin from the Colonial
Pipeline operator and the Irish Health service. Regulators can
impede the use of crypto assets as a substitute for the Dollar orother currencies simply by making them non-convertible. An
asset only has value if it can either be used or sold. And
Chinese and Indian authorities have already challenged cryptouses in payments.
As a result, the market share of coins used for other purposes
beyond currencies like “smart contracts” and “information
tokens” (see pgs. 26-27) will likely continue to rise. However,even these non-currency uses will need to be recognized bycourts of law to be accepted in commercial transactions—aquestion we leave to the lawyers.
The network creates the value, unlike other commodities
Unlike other commodities, coins derive their entire value fromthe network. A bitcoin has no value outside of its network as itis native to the Bitcoin blockchain. The value of oil is also largely
Goldman Sachs Global Investment Research

derived from the transportation network that it fuels, but atleast oil can be burned to create heat outside of this network.
At the other extreme, gold doesn’t require a network at all.

Non-currency crypto assets are starting to dominate use

Transactions on the Ethereum blockchain vs. transactions on the
Bitcoin blockchain, ratio (lhs); Number of active nodes on Ethereum
network vs. active nodes on Bitcoin network, ratio (rhs)8
7
6

Relative use of Ethereum network vs. Bitcoin
network (lhs)
Relative size of active Ethereum network vs. active
Bitcoin network (rhs)

5

1
0.9
0.8
0.7
0.6

4

0.5

3

0.4
0.3

2

0.2

1
0
2015

0.1
2016

2017

2018

2019

2020

0

Source: Bloomberg, Goldman Sachs GIR.

Derived demand leaves the holder of the commodity exposedto the risk of the network becoming obsolete—a lesson that
holders of oil reserves are now learning with decarbonization
accelerating the decline of the transportation network, and, inturn damaging oil demand. Likewise, bitcoin owners faceaccelerated network decay risk from a competing network,
backed by a new cryptocurrency.
As the demand for gold is not dependent on a network, it will
ultimately outlive oil and bitcoin—gold entropy lies at the unit,
not the network, level. Indeed, most stores of value that areused as defensive assets—like gold, diamonds andcollectibles—don’t have derived demand and therefore only
face unit-level entropy risk. This is what makes them defensive.
The world can fall apart around them and they preserve theirvalue. And while they don’t have derived demand, they do haveother uses that establish their value, i.e. gold is used for jewelry
and as a store of value.
Transactions drive value, creating a risk-on asset
Crypto doesn’t trade like gold and nor should it. Using any
standard valuation method, transactions or expectedtransactions on the network are the key determinant of network
value. The more transactions the blockchain can verify, thegreater the network value. Transaction volumes and thedemand for commodified information are roughly correlatedwith the business cycle; thus, crypto assets should trade as
pro-cyclical risk-on assets as they have for the past decade.
Gold and bitcoin are therefore not competing assets as iscommonly misunderstood, and can instead co-exist.
Because the value of the network and hence the coin is derived
from the volume of transactions, hoarding coins as stores ofvalue reduces the coins available for transactions, which
reduces the value of the network. Because gold doesn’t havethis property, it is the only commodity that institutional
investors hold in physical inventory. Nearly all othercommodities are held in paper inventory in the form of futures
to avoid disrupting the network. This suggests that, like oil,12

Issue 98Elcrypto investments will need to be held in the form of futurescontracts, not physically, if they are to serve as stores of value.

the most valuable crypto assets will be those that help verify
the most critical information in the economy.

Crypto assets aren’t digital oil, either, as they are not nondurable consumables and can therefore be used again. This
durability makes them a store of value, provided this demanddoesn’t disrupt network flows. The crypto assets that have thegreatest utility are also likely to be the dominant stores ofvalue—the high utility reduces the carry costs.

Over time, the decentralized nature of the network will diminish
concerns about storing personal data on the blockchain. One’s
digital profile could contain personal data including asset
ownership, medical history and even IP rights. Since thisinformation is immutable—it cannot be changed without
consensus—the trusted information can then be tokenized andtraded. A blockchain platform like Ethereum could potentiallybecome a large market for vendors of trusted information, likeAmazon is for consumer goods today.

Payment networks—and hence cryptocurrencies—are procyclical, as greater use drives value
65

Bitcoin price, log, yoy (lhs)
GS Risk Appetite Indicator (rhs)

4
3
2

2.5
1.5
0.5

1
0
-1
-2

-0.5
-1.5

-3
-2.5
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Bloomberg, Goldman Sachs GIR.

So what is crypto? A powerful networking effect
The network provides crypto an extremely powerful networking
externality that no other commodity possesses. The
operators—miners, exchanges and developers—are all paid in
the native coin, making them fully vested in its success.
Similarly, users—merchants, investors and speculators—are
also fully vested. This gives bitcoin holders an incentive toaccommodate purchases of their own products in bitcoin,
which in turn, creates more demand for the coins they alreadyown. Similarly, ether holders have an incentive to build apps
and other products on the Ethereum network to increase thevalue of their coins.
Because the coin holders have a stake in the network,
speculation spurs adoption; even during bust periods, coinholders are motivated to work to create the next new boom.
After the dot-com bust, the shareholders had no commodity topromote. In crypto assets, even when prices collapse, the coinholders have a commodity to promote. They will always live foranother boom, like an oil wildcatter.
It’s all about information
As the value of the coin is dependent on the value of thetrustworthy information, blockchain technology has gravitatedtoward those industries where trust is most essential—finance,
law and medicine. For the Bitcoin blockchain, this information is
the record of every balance sheet in the network, and thetransactions between them—originally the role of banks. In thecase of a smart contract—a piece of code that executes
according to a pre-set rule—on Ethereum, both the terms ofthat contract (the code) and the state of the contract (executedor not) are the information validated on the Ethereum
blockchain. As a result, the counterparty in the contract cannot
claim a transfer of funds without the network forming a
consensus that the contract was indeed executed. In our view,
Goldman Sachs Global Investment Research

Crypto beyond this boom and bust cycle
By many measures—Metcalfe’s Law or Network Value toTransactions (NVT) ratio —crypto assets are in bubble territory.
But does the demand for “commodified information” create
enough economic value at a low enough cost to be scaled up in
the long run? If the legal system accommodates these assets,
we believe so. While many overvalued networks exist, a few
will likely emerge as long-term winners in the next stage of thedigital economy, just as the tech titans of today emerged fromthe dot-com boom and bust. This transformation is happening
now—there are already an estimated 21.2 million owners ofcryptocurrencies in the US alone. However, technological,
environmental and legal challenges still loom large.
Ethereum 2.0 is expected to ramp up capacity to 3,000transactions per second (tps), while sharding—which will scale
Ethereum 2.0’s Proof of Stake (PoS) system through parallelverification of transactions—has the potential to raise capacity
to as much as 100,000 tps. For context, Visa has the capacity toprocess up to 65,000 tps but typically executes around 2,000
tps. PoS intends to have validators stake the now scarce andvaluable coins to incentivize good behavior instead of having
miners expend energy to mine new blocks into existence, as
under Proof of Work, making crypto assets more ESG friendly.
PoS also can significantly boost computational time in terms oftransactions per second, which will further incentivize
technological adoption. Ironically, this is likely where the valueof and demand for bitcoin will come from—being used as the
scarce resource to make the PoS system work instead ofnatural resources.
While overcoming the economic challenges will likely be
manageable, the legal challenges are the largest for many
crypto assets. And this past week was challenging for crypto
assets with confirmation that the 75 bitcoin ransom over the
Colonial Pipeline was actually paid. This is a reminder thatcryptocurrencies still facilitate criminal activities that have largesocial costs. For Ethereum, new companies which aim to
disrupt finance, law or medicine by integrating information
stored on the platform into their algorithms are likely to run into
problems with being legally recognized. If crypto assets are to
survive and grow to their fullest potential, they need to definesome concept of “sufficiently decentralized” that will satisfy
regulators; otherwise, the technologies will soon run out ofuses.

Jeff Currie, Global Head of Commodities Research
Email:
Tel:

jeffrey.currie@gs.com
44-20-7552-7410

Goldman Sachs and Co. LLC

13

Issue 98

Bitcoin: sizing the market
El

Around 90% of all bitcoin that will ever exist is in circulation

Artificial scarcity is programmed into the bitcoin market

Total circulating and adjusted supply, million

Annual bitcoin inflation rate (new units as % of current supply), %

22

18%

20

16%

18

Lifetime cap on bitcoin supply: 21mn

Second halving:
Reward for eachmined bitcoin drops
to 12.5 BTC

14%

16

12%

14
12

10%

10

8%

8
6

Adjusted supply (- lost coins)4

Circulating supply

2011

2013

2015

2017

6%
4%
2%

2
0
2009

Third halving:
Reward for eachmined bitcoin drops
to 6.25 BTC

2019

2021

0%
2014

2016

2015

2017

2018

2019

2020

2021

Note: Adjusted supply includes estimate of lost coins based on those thathaven't moved in over seven years.
Source: Glassnode, Goldman Sachs GIR.

Source: Glassnode, Goldman Sachs GIR.

One measure suggests that 80% of bitcoin supply is illiquid

The footprint of short-term bitcoin holders is fairly small

Percent of total supply by liquidity, %Highly liquid

Liquid5
Age distribution of bitcoin supply
based on last transaction
.

1d-1w
5y-7y

24h
1y-5y

Illiquid

100

1w-1m
7y-10y1m-12m>10y
Short term: 4%(<1 week)

90

Long term: 55%(>1yr)

80
70

Mediumterm: 41%
(1w - 1yr)

60
50
40
30
20
10
0
2015

2016

2017

2018

2019

2020

2021

Note: Based on the ratio of the cumulative inflows/outflows of all entities in the
Bitcoin network. See more details here.
Source: Glassnode, Goldman Sachs GIR.

Note: Based on the percentage of bitcoin in existence that was last moved withineach given time period. See more detail here.
Source: Glassnode, Goldman Sachs GIR.

One measure that looks at network addresses suggests
bitcoin holdings are fairly concentrated

A measure that looks at bitcoin entities shows less concentration
among "whales", because entities can own many addresses

Total supply held by size of addresses' coin holdings, % total

Total supply held by size of entities' coin holdings, % total

<1

1-10

10-100

1K-10K

10K-100K

11%

5%

>100K

~14% ofbitcoin supply
is held bysmall owners

3%

Likely exchanges,
custodians, andminers"Whales"100-1K

9%

<1

1-10

10-100Likelyexchanges,
custodians,
and miners

18%

22%

21%

Note: Shows share of total bitcoin supply held by the balance of different addresses.
See more detail here.
Source: CoinMarketCap, Goldman Sachs GIR.
Goldman Sachs Global Investment Research

1K-10K
5%

10K-100K

>100K

9%
17%

9%

23%

28%

100-1K

20%

Share of "whales"

Note: Shows share of total bitcoin supply held by the balance of different entities.
See more detail here.
Source: Glassnode, Goldman Sachs GIR.
14

Issue 98

Ethereum: sizing the market
El

Unlike bitcoin, the all-time supply of ether isn't capped

But the pace of new supply creation has come down

Total circulating supply, million

Annual ETH inflation rate (new units as % of current supply), %140

20Current supply:~115mn

120

16
14

100

12
Supply increases atrelatively fixed ratewith no all-time limit

80
60

18

Intial ether supply:
72mn

10
8

4

40

2

20
2015

2016
2016

2017
2017

Block reward:
reduced to 2 ETH

620182018 20192019 202020202021 2021

0
2016

Block reward:
reduced to 3 ETH

2017

2018

2019

2020

2021

Note: A recently approved network update could reduce supply; see here.
Source: Glassnode, Goldman Sachs GIR.

Source: Glassnode, Goldman Sachs GIR.

Fees on the Ethereum network have risen with transactions

More than 2.5K decentralized apps are built on Ethereum

Average price paid per transaction ("gas"), $New and total decentralized apps, count0.0014140

0.0012120

0.0010100

0.0008800.000660

New
decentralized
apps (lhs)

5
.

3000
2500

Total
decentralized
apps (rhs)

2000
1500
1000

40

0.0004500

200.00020.0000
2016

2017

2018

2019

2020

2021

0
2015

2016

2017

2018

2019

2020

2021

Note: For more details on Ethereum transaction fees see here.
Source: Glassnode, Goldman Sachs GIR.

Source: stateofthedapps.com, Goldman Sachs GIR.

Ether holdings are modestly shorter duration than bitcoin

More than 20% of ether supply is held in smart contracts

Age distribution of ether supply based on last transaction

Ether supply held in smart contacts, % total supply

24h

1d-1w

1w-1m

1m-3m

6m-12m

1y-2y

2y-3y

3y-5y

Long term: 47%(>1yr)

3m-6m

30%

Short term: 3%(<1 week)

25%

0

20%
15%
10%

Mediumterm: 50%
(1w - 1yr)
Note: Based on the percentage of ether in existence that was last moved within eachgiven time period.
Source: Glassnode, Goldman Sachs GIR.
Goldman Sachs Global Investment Research

5%
0%
2016

2017

2018

2019

2020

2021

Source: Glassnode, Goldman Sachs GIR.

15

Issue 98

Interview with Michael Sonnenshein
El

Michael Sonnenshein is CEO at Grayscale Investments. Below, he discusses the evolution of
the digital asset ecosystem and the factors behind rising institutional interest in the space.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: How does Grayscale
and its parent company, Digital
Currency Group, engage in thedigital asset universe?
Michael Sonnenshein: Grayscale
Investments is a digital currency asset
manager with AUM of about $45 billion
today spread across a family of 14
unique investment products, the largestof which is the Grayscale Bitcoin Trust.
The Grayscale business model is predicated on providing
investors access and exposure to digital currencies while
avoiding the challenges involved in buying and safely storing
digital currencies themselves. Our parent company, Digital
Currency Group, is a conglomerate that seeks to invest in, build,and purchase businesses related to digital currency andblockchain technology, and has invested in about 170 digitalcurrency/blockchain-related businesses in over 40 countries.
Allison Nathan: How do your products differ from a crypto
ETF, which has yet to gain regulatory approval in the US?
Michael Sonnenshein: All of our products are passive, long-only
funds that are directly invested in the referenced digital asset foreach product. So a $100 investment in the Grayscale Bitcoin
Trust is backed by $100 worth of bitcoin, which is bought in themarket and then stored in cold storage with a qualified custodianthat is a fiduciary under New York state banking laws, and who
also insures the assets. Today, six out of the 14 funds are also
publicly quoted and traded on the OTCQX markets, where the
ADRs of many foreign companies trade. These represent a
secondary market that in some ways mimic the attributes of an
ETF because they trade every day, but they are not ETFs. The
two largest differences between them and an ETF are, one, they
do not trade on a national securities exchange, like NYSE or
NASDAQ, and two, they do not have ongoing creation andredemptions like ETFs. So they operate more like a closed-end
offering than an ETF.
Allison Nathan: You have a bird’s eye view on the digitalasset investor base. How has it evolved?
Michael Sonnenshein: In 2013/14, when I got my start in thedigital currency space, only Silicon Valley VCs, and maybe someforward-thinking family offices, were speaking about digitalassets. Over time, interest in digital assets began to trickle down
to retail investors who were gaining access to crypto throughtrading platforms and order books. And, more recently, the mostmeaningful shift has been increased interest from institutional
investors. Several years ago, digital assets were generally
considered a taboo asset class among institutional investors
because of perceived reputational risks, regulatory concerns anda view that engaging in digital assets was just too much of adeparture from the other strategies they typically employ.
Today, not only is there a general appreciation amongst all
investors, including the institutional community, that digitalassets are here to stay, but also all of those preconceived
Goldman Sachs Global Investment Research

notions have been shrugged off. We no longer hear concerns
about nefarious activity on the blockchain. We no longer hear
about reputational concerns; investors now want their fiduciaries
to participate in crypto. And we no longer hear concerns about
regulatory risk; regulators have provided enough clarity forinvestors to feel comfortable participating.
Over just the last 12 to 18 months, the asset class has reallyturned the corner as some well-known and experienced
investors have publicly come out in support of crypto,
corporations have begun to allocate to crypto on their balance
sheet as a reserve asset, and participation from legacy financial
institutions has materially increased. All of these developments
signal that, across the spectrum, the investment community
wants to participate in the crypto ecosystem, and is as smart asever on the asset class. I have yet to find somebody who hasreally done their homework on crypto assets that isn’t truly
amazed by the potential for the asset class.
That being said, in the same way that not every investment
opportunity will be right for all investors, digital assets are notnecessarily the best fit for all institutions. It's also important toremember that the asset class is only 10-12 years old and so is
still in its very early days. But we are now at a point where thecrypto market is as robust as it's ever been in terms of being a
two-sided market, having the ability to engage in derivatives,
lending and borrowing, and offering many of the same kinds ofproducts as traditional asset classes.
Allison Nathan: Why do institutional investors want to be
involved in the market?
Michael Sonnenshein: The potential for significant upside iscertainly an attraction. But more than anything, investors realize
the significant diversification benefit of adding crypto to theirportfolios, which can help them achieve higher risk-adjusted
returns. As policymakers have injected substantial stimulus into
the financial system in order to jumpstart the economy from the
COVID-related slowdown, investors have become increasingly
attracted to the finite quality of assets like bitcoin—which isverifiably scarce—as a way to hedge against inflation andcurrency debasement. Investors are starting to move out ofassets like gold, which historically have served as stores of value
or inflation hedges, as they realize that assets like bitcoin canalso serve those roles in their portfolios.
Allison Nathan: But given the short history of bitcoin/digitalassets, isn’t it too soon to conclude that these assets
provide diversification benefits or are a hedge against
inflation, especially since they seemed to act more like risky
assets during the depths of the pandemic recession?
Michael Sonnenshein: We’ve found that during some macro
shocks, like the devaluation of the renminbi in 2015 or theunexpected Brexit vote in 2016, crypto outperformed. However,during periods of broad-based selloffs or de-leveraging, like wesaw in March 2020 when COVID-19 brought the global economy
to a grinding halt, nothing was safe from what was taking placein the system. Everything sold off—bonds, currencies, equities,
16Issue 98El

and crypto. But crypto snapped back much faster and moresignificantly than other asset classes over the course of 2020.
After probably the hundredth time of pronouncing crypto“dead”, that resiliency and staying power has solidified for a lotof investors that this is a space they want to be in.
Allison Nathan: But can bitcoin survive as a store of value
since it has no other uses—compared to gold that is used
for jewelry, art, wine, etc.—which could temper its volatility
and put a floor on its value?

$700bn market cap, which represents 700 billion dollars ofswitching costs that would need to be monetized for users tomove from bitcoin to something else. Bitcoin's open source
nature provides reassurance that over time as it is challenged, it
will integrate new and better features that prevent it frombecoming the Myspace to an eventual Facebook.
Allison Nathan: Do you hear institutional investors
expressing concerns over the high concentration of crypto
holdings or the environmental aspects of mining?

Michael Sonnenshein: People have largely left behind the ideathat bitcoin needs to be used in everyday commerce in order tobe successful, and since it hasn’t yet replaced the Dollar nor am
I yet buying my latte with it, it has failed. Again, it’s important todrive home the notion that we are still in the early days of thedevelopment of crypto assets and use cases for them. Today,
the developed world use case for bitcoin is primarily as a digital
store of value that is more suitable to today’s digital world
compared to the physical world in which gold may havehistorically served a better purpose.

Michael Sonnenshein: There is certainly concentration within
the crypto ecosystem among a relatively small number ofentities, but that’s not unique to crypto. And we do sometimes
hear concerns about the energy consumption of bitcoin miners,
but there’s quite a lot of misinformation out there around this.
While mining is very energy intensive, it is extremelycompetitive, and one way that miners can beat out others formining rewards is to utilize the lowest cost energy. So miners
have moved to lower-cost renewable energy sources as muchas possible, including solar, wind, hydro, etc.

Many investors also think of digital asset exposure as an earlystage technology investment or as a conduit to the next
generation of payment systems and the way in which value may
be moved around the world, potentially disrupting remittancenetworks, cross border payments, etc. But they have thepotential to unlock all kinds of other use cases, including areas
like microfinancing and micropayments, and leveraging theunderlying blockchain technology for commerce, shipping,
manufacturing, etc. This technology is truly the most secure andmost widely utilized consensus mechanism the world has everhad. And when you think about how powerful consensus can be,
we're not yet anywhere close to utilizing the full capabilities ofwhat the protocol may offer.

Allison Nathan: So what are the remaining roadblocks tofurther institutional adoption and how likely are they to be
overcome?

Allison Nathan: But isn’t it now well-known that transaction
speeds on the Bitcoin blockchain are too slow for it to be
useful in the payment system and other commercial uses?
Michael Sonnenshein: You’re right to call out that one of theflaws of Bitcoin is its relatively slow transaction speed. The
transactional nature of bitcoin is akin to what you see on Black
Friday when many payment networks are bogged down because
so many people are shopping and using their credit cards. But
slower-than-desirable transaction speeds are also a sign of
Bitcoin's success; the quantity of transactions transpiring on the
network was never conceived to be as high as it is today. A
variety of efforts have been and are underway to challenge that
attribute, and I believe we will continue to find ways to increasetransactional throughput.
Allison Nathan: There are already some offshoots of the
Bitcoin blockchain that improve upon this flaw. So isn’t it
likely that improvements won’t be captured by bitcoin itself,
but by another crypto asset?
Michael Sonnenshein: Bitcoin is an open source protocol,
which means that people are able to take its source code, copy
it over, tweak one attribute, and then launch it as a new digitalcurrency. Some of those currencies, like bitcoin cash, have hadstaying power and have developed a real user base. That said,
the success of one crypto asset over another really boils down
to the value of the network built into them. Today, bitcoin has aGoldman Sachs Global Investment Research

Michael Sonnenshein: The biggest obstacles primarily relate to
the plumbing around crypto assets, and the remaining gap
between the crypto asset ecosystem and the traditional financial
system, but both are actively being addressed. The
underpinnings of the crypto ecosystem are still maturing, buttremendous work is underway in terms of improving ordermanagement systems, tax lot reporting, algorithms, application
programming interfaces (APIs), custodial solutions, and all of thenuts and bolts that digital assets need to thrive. Investors also
still can’t access digital assets as easily—or, for the most part,through the same channels—as they do traditional instruments.
Recent and future potential developments that bridge the gap
between these two ecosystems, such as being able to buy
crypto through your prime broker or leveraging a bitcoin ETF, will
go a long way in enabling greater participation in digital assets.
Allison Nathan: How much of the interest in digital assets isnow being directed beyond bitcoin to other cryptos?
Michael Sonnenshein: There is a meaningful bid for otherdigital assets from investors who appreciate not only thediversification benefits from owning crypto as an asset class, butalso the benefits of diversifying their crypto allocation. As
investors have seen the advent of new use cases on top of
blockchains like Ethereum, whether that be the proliferation ofdecentralized finance (DeFi), non-fungible tokens (NFTs), etc.,
they have increasingly moved beyond just allocating to bitcoin
and instead are seeking exposure to the entire ecosystem.
Allison Nathan: Dogecoin: a blessing or a curse for cryptos?
Michael Sonnenshein: Dogecoin is a demonstration of just howeasy it is to create a digital asset. It, along with a slew of otherdigital assets, was created by enthusiasts basically for fun. That
drills home the point that it’s important for investors to scrutinize
use cases and whether the asset is viable and has the potential
to gain real world traction by solving a real world problem versus
a solution in search of a problem that may not exist.

17Issue 98

What is a digital store of value?
El

Mikhail Sprogis and Jeff Currie argue that
other cryptocurrencies besides bitcoin are
better positioned to become the dominantdigital store of value

Economic value is created when marginal benefit exceeds
marginal cost, and crypto fails this test

Based on emerging blockchain technology that has the power todisrupt global finance, yet with limited clear use today, bitcoin
has been labeled a solution looking for a problem. Many
investors now view bitcoin as a digital store of value,comparable to gold, housing, or fine wine. But all true stores ofvalue in history have provided either income or utility, and bitcoin
currently provides no income and only very modest utility.
However, unlike bitcoin, several other crypto assets have clear
economic rationales behind their creation. Bitcoin’s first-moveradvantage is also fragile; crypto remains a nascent field withshifting technology and consumer preferences, and networks
that fail to adjust quickly could lose their leadership. We
therefore see a high likelihood that bitcoin will eventually lose its
crown as the dominant digital store of value to anothercryptocurrency with greater practical use and technologicalagility. Ether looks like the most likely candidate today toovertake bitcoin, but that outcome is far from certain.
What is a store of value?
A store of value is anything that preserves its value over time.
While financial stores of value like equities and bonds hold theirvalue because they produce a given cash flow, yield is not aprerequisite for value. Art, wine, gold, and non-yielding
currencies are widely used as stores of value too. Yet all ofthese non-yielding assets have a clear material use besides
being stores of value. This usefulness generates a “convenience
yield”—the incentive for people to own them—that reflects boththe utility a consumer derives from using these assets and therelative scarcity of that utility—a fact captured by Adam Smith’s
famous Diamond-Water paradox.
We place assets on a continuum across time by their store ofvalue properties. We identify stores of future value, like financial
assets that offer the owner the right to future yields or thepromise of growing value over time, stores of present value, likeconsumable commodities such as oil and grains for which theutility of driving and eating today imparts a convenience yield,
and stores of past value, like gold, art or even housing in which
the assets store value generated in the past because of theirduration.
Value always stems from use
The key to stores of past value like gold and houses is thatsomeone demanded these assets in the past and placed value inthem by exchanging something of value, usually currency, forthem. Indeed, all important non-yielding stores of value
developed real uses before becoming investment assets. For
instance, gold was first used as jewelry to signal permanence,commitment or immortality. The economic problem was a needto signal permanence, and gold’s durable and inert elemental
properties solved that problem. Given the state of technology at
the time, gold was the only solution for this problem, which
explains why so many societies adopted it for this use.

Goldman Sachs Global Investment Research

Source: Bloomberg, Goldman Sachs GIR.

And when societies began to conquer each other and needed ameans to standardize international trade, gold was the natural
choice to solve this economic problem as most societies alreadyowned gold and it was divisible. Real use is important for storesof value because consumption demand tends to be pricesensitive and therefore provides some offset to fluctuations ininvestment demand, tempering price volatility. For example,
jewelry demand is the swing factor in the gold market, fallingwhen investment demand for gold pushes prices higher, andvice versa.
Ether beats bitcoin as a store of value
Given the importance of real uses in determining store of value,
ether has high chance of overtaking bitcoin as the dominantdigital store of value. The Ethereum ecosystem supports smart
contracts and provides developers a way to create new
applications on its platform. Most decentralized finance (DeFi)
applications are being built on the Ethereum network, and most
non-fungible tokens (NFTs) issued today are purchased using
ether. The greater number of transactions in ether versus bitcoinreflects this dominance. As cryptocurrency use in DeFi and NFTs
becomes more widespread, ether will build its own first-moveradvantage in applied crypto technology.
Ethereum can also be used to store almost any information
securely and privately on a decentralized ledger. And thisinformation can be tokenized and traded. This means that the
Ethereum platform has the potential to become a large market
for trusted information. We are seeing glimpses of that todaywith the sale of digital art and collectibles online through the useof NFTs. But this is a tiny peek at its actual practical uses. For
example, individuals can store and sell their medical data
through Ethereum to pharma research companies. A digitalprofile on Ethereum could contain personal data including asset
ownership, medical history and even IP rights. Ethereum also
has the benefit of running on a decentralized global server baserather than a centralized one like Amazon or Microsoft, possibly
providing a solution to concerns about sharing personal data.

18

Issue 98
El

Real demand for gold is a powerful price stabilization tool
tonnes1000
900

Private investment demand for gold
Fabrication and central bank demand for gold

could double if bitcoin prices rise to $100,000. This makes
bitcoin investment challenging from an ESG perspective.

User base numbers remain highly volatile, meaning thatleadership can change quickly

800

Thousands (lhs), % (rhs)

700

1400

600
500
400
300
200
100
0
-100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: World Gold Council, Goldman Sachs GIR.

A major argument in favor of bitcoin as a store of value is its
limited supply. But demand, not scarcity, drives the success ofstores of value. No other store of value has a fixed supply. Goldsupply has grown nearly ~2% pa for centuries, and it hasremained an accepted store of value. Plenty of scarce elements
like osmium are not stores of value. In fact, a fixed and limited
supply risks driving up price volatility by incentivizing hoarding
and forcing new buyers to outbid existing holders, potentiallycreating financial bubbles. More important than having a limited
supply to preserve value is having a low risk of dramatic andunpredictable increases in new supply. And ether, for which thetotal supply is not capped, but annual supply growth is, meets
this criterion.
Fast-moving technologies break first-mover advantage
The most common argument in favor of bitcoin maintaining its
dominance over other cryptocurrencies is its first-moveradvantage and large user base. But history has shown that in anindustry with fast-changing technology and growing demand, afirst-mover advantage is difficult to maintain. If an incumbent
fails to adjust to shifting consumer preferences or competitors’
technological advances, they may lose their dominant position.
Think of Myspace and Facebook, Netscape and Internet Explorer
or Yahoo and Google.
For crypto networks themselves, active user numbers havebeen very volatile. During 2017/18, Ethereum was able to gain
an active user base that was 80% the size of Bitcoin's within
one year. Ethereum's governance structure, with a central
developer team driving new proposals, may be best suited fortoday's dynamic environment in which crypto technology ischanging rapidly and systems that fail to upgrade quickly can
become obsolete.
Indeed, Ethereum is undergoing much more rapid upgrades to
its protocol than Bitcoin. Namely, Ethereum is currently
transitioning from a Proof of Work (PoW) to a Proof of Stake(PoS) verification method. Proof of Stake has the advantage ofdramatically increasing the energy efficiency of the system as it
rewards miners based on the amount of ether holdings theychoose to stake rather than their processing capacity, which willend the electricity-burning race for miner rewards. Bitcoin’s
energy consumption is already the size of the Netherlands andGoldman Sachs Global Investment Research80%

Ethereum active
addresses (lhs)

1200

70%

Bitcoin active
addresses (rhs)

1000

60%

Ratio (rhs)

50%

800

40%
600

30%

400

20%

200

10%

0
2015

2016

2017

2018

2019

2020

0%
2021

Source: Glassnode, Goldman Sachs GIR.

While PoS protocols raise security concerns due to the need fortrusted supervisors in the verification process, Bitcoin is also not
100% secure. Four large Chinese mining pools control almost
60% of bitcoin supply and could in theory collude to verify a faketransaction. Ethereum too faces many risks and its ascendance
to dominance is by no means guaranteed. For instance, if the
Ethereum 2.0 upgrade is delayed, developers may choose to
move to competing platforms. Equally, Bitcoin's usability canpotentially be improved with the introduction of the Lightning
Network, a change of protocol to support smart contracts and ashift to PoS. All cryptocurrencies remain in early days with fastchanging technology and volatile user bases.
High vol is here to stay until real use drives value
The key difference between the current rally in crypto and thecrypto bull market of 2017/18 is the presence of institutional
investors—a sign that financial markets are starting to embrace
crypto assets. But bitcoin’s volatility has remained persistently
high, with prices falling 30% in one day in just this past week.
Such volatility is unlikely to abate until bitcoin has an underlying
real, economic use independent of price to smooth out periodsof selling pressure. Indeed, more recently, institutional
participation has slowed as reflected in lower inflows into crypto
ETFs, while the outperformance of altcoins indicate that retail
activity has once again taken center stage. This shift frominstitutional adoption to increasing retail speculation is creating amarket that is increasingly comparable to that of 2017/18,
increasing the risk of a material correction. Only real demandthat solves an economic problem will end this volatility andusher in a new mature era for crypto—one based upon
economics rather than upon speculation.

Mikhail Sprogis, Senior Commodities Strategist
Email:
Tel:mikhail.sprogis@gs.com
44-20-7774-2535

Goldman Sachs and Co. LLC

Jeff Currie, Global Head of Commodities Research
Email:
Tel:

jeffrey.currie@gs.com
44-20-7552-7410

Goldman Sachs and Co. LLC

19

Issue 98

The role of crypto in balanced portfolios
El

Christian Mueller-Glissmann argues that the
short and volatile history of bitcoin makes it
difficult to assess how much of a beneficial
role it could play in multi-asset portfolios
An important question both for asset allocators and for those
assessing the prospect of further investor adoption of
cryptocurrencies is how they fit into a multi-asset portfolio. In
recent years, balanced portfolios have become imbalanced as
low bond yields have provided less of a buffer against equity
drawdowns and as the risk of rising inflation has grown. This has
kicked off an intense search for alternative diversifiers that canhelp multi-asset portfolios buffer growth or rate shocks. But to
add value from a portfolio perspective, an asset should offer an
attractive risk/reward or low correlations with other assets, andpreferably both. Over the last 35 years, bonds served this role as
they delivered attractive risk-adjusted returns while being
negatively correlated with equities.

However, bitcoin’s strongest performance contribution to theportfolio resulted from isolated rallies in 2017, 2019 and lastyear, when it received a major boost from the COVID-19 crisis.
Since 2014, bitcoin has actually often declined during equity
drawdowns like in 2015, 2018 and 1Q20. These large
drawdowns, combined with bitcoin’s high volatility, haveeventually outweighed the benefits of having it in a portfolio at
higher allocations. Even with just a 5% allocation in a 60/40
portfolio, bitcoin drove roughly 20% of the portfolio’s volatility,
while US 10y bonds contributed only 2%. That is likely too muchconcentrated risk exposure for an institutional multi-asset
portfolio, and such high volatility also limits the potential
allocations from investors employing risk parity strategies ortargeting a specific level of risk in the portfolio.

Strong performance during the rallies in 2017, 2019 and
the COVID-19 crisis
One-year rolling return
70%

Difference
60/40 portfolio

60%+5% allocation to bitcoin

50%With 20% ($14tn) of global debt offering negative yields, thehurdle rate for other assets to compete with bonds for the roleof diversifier has declined. As a result, the lack of cash flow or
yield from cryptocurrencies has become less of a concern,
especially as the same is true for gold and most DM FX. And
bitcoin, which was the first cryptocurrency and has the largest
market cap today, has posted strong risk-adjusted returns mostly
uncorrelated with traditional assets. But the history of bitcoin
has been short and volatile—with a large proportion of thatvolatility idiosyncratic---making it difficult to assess how much ofa beneficial role it could play in multi-asset portfolios. And
institutional and other constraints remain headwinds for broader
investor adoption.

Source: Bloomberg, Goldman Sachs GIR.

Small allocation, big impact

Untested correlations, high idiosyncratic risk

Just a small allocation to bitcoin in a standard US 60/40 portfolio
would have enhanced risk-adjusted returns materially since 2014
(while bitcoin prices are available from mid-2010, we use prices
since 2014 as bitcoin was not easily accessible to investors
before then), even as balanced portfolios performed strongly on
their own. Driving the enhanced performance was both higher
risk-adjusted returns for bitcoin compared to the S&P 500 and
US 10y bonds, despite much higher volatility, as well as
diversification benefits from relatively low correlations between
bitcoin and other assets.

To assess the potential future diversification benefits of having
bitcoin in their portfolios, investors need to understand thelinkages between bitcoin and macro fundamentals, sentimentand other assets through the cycle. But bitcoin’s history is too
short to cover a full business cycle or a period of high inflationarypressures, so it is unclear how bitcoin would behave during aperiod of large growth and rate shocks. During the COVID-19
crisis, bitcoin became very correlated with other assets andturned out to be a highly levered bet on reflation.

40%
30%
20%
10%
0%
-10%
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

A small allocation to bitcoin has enhanced a 60/40 portfolio in recent years
Since 2014
Return p.a.
Volatility (daily)
Volatility (monthly)
Return/volatility
5% CVaR
Max drawdown
2014-2019
Return p.a.
Volatility (daily)
Volatility (monthly)
Return/volatility
5% CVaR
Max drawdown

S&P 500

US 10ybond

Bitcoin60/40
portfolio

+2.5%

14%
18%
15%
0.77
-10%
-34%

4%
6%
6%
0.60
-3%
-11%

79%
73%
87%
1.08
-35%
-83%

10%
10%
8%
1.03
-5%
-18%

12%
10%
9%
1.24
-6%
-19%

14%
10%
10%
1.39
-6%
-19%

19%
12%
13%
1.53
-7%
-20%

27%
18%
20%
1.53
-10%
-29%

12%
13%
11%
0.92
-7%
-19%

4%
6%
6%
0.66
-3%
-11%

46%
74%
87%
0.62
-35%
-83%

9%
7%
6%
1.26
-4%
-11%

11%
7%
7%
1.46
-4%
-11%

12%
8%
8%
1.56
-4%
-12%

15%
10%
11%
1.53
-5%
-18%

21%
16%
19%
1.31
-8%
-29%

Allocation to bitcoin
+5%
+10%

+20%

Source: Bloomberg, Goldman Sachs GIR.
Goldman Sachs Global Investment Research20Issue 98
El

Since the beginning of 2021, correlations with traditional assets
have declined again, although bitcoin remains negatively
correlated with the Dollar. While it’s still too early to say forcertain, this suggests that investors are treating bitcoin as ahedge against monetary debasement, similar to gold or real
assets more broadly.

Low and unstable correlations between bitcoin and otherassets, until recently
One-year rolling correlation, weekly changes
0.6

S&P 500

US 10y bond

Gold

Oil

DXY

0.5

with >50% drawdowns within a month and peak-to-troughdeclines of 80-90%. Just in 2021 alone, exceptionally large
drawdowns have occurred in every month: -26% in January,-25% in February, -15% in March and -22% in April. But
alongside that high risk, bitcoin delivered strong returns, with theprice reaching all-time highs in April. Gold saw similarly highvolatility and a sharp rally after the collapse of Bretton Woods in
1971. But once US private investors were allowed to get
exposure to gold, first via certificates and then physically in the
mid-1970s, volatility and returns eventually declined. The samemight happen to cryptocurrencies if/when the market matures.

Bitcoin: not quite a safe haven

0.4

One-year rolling volatility, daily returns
250%

0.3

BitcoinS&P 500Gold
Oil
Nasdaq
DXY

0.2

200%

0.1
0.0

150%

-0.1
-0.2
-0.3
2012

100%
2013

2014

2015

2016

2017

2018

2019

2020

2021

Source: Bloomberg, Goldman Sachs GIR.

Despite these correlations, most of the variation in bitcoin has
been idiosyncratic. This could be good from a diversification
perspective, but only if bitcoin were to have a positive expected
return that is both predictable and attractive on a risk-adjusted
basis. Given its limited and known supply, the price of bitcoinshould primarily depend on investor demand and its perceived
value. But investor demand so far seems to be linked to theasset itself rather than macro factors; adoption by retailinvestors---and recently some institutions—has boosted prices
while regulatory and tax concerns—as well as positioning—have
driven sharp setbacks. Without more clarity on theseidiosyncratic drivers, assessing bitcoin’s future risk/reward
remains difficult.

Bitcoin has had high idiosyncratic risk since its inception

One-year rolling R-squared of a regression of bitcoin on S&P 500, US
10y bond, oil, gold, and DXY, weekly changes
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Source: Bloomberg, Goldman Sachs GIR.

High return, high risk during early adoption
Bitcoin’s volatility has arguably been more stable than its
correlations and returns, but at very high levels. Whilecommodities in general tend to be more volatile than financial
assets due to inelastic supply and oftentimes price-insensitive
demand, bitcoin’s price swings have been particularly extreme,
Goldman Sachs Global Investment Research

50%0%2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Bloomberg, Goldman Sachs GIR.

But, until then, the high and mostly idiosyncratic volatility of
bitcoin can make it an unreliable macro hedge, especially overshort time horizons, and increases the risk to balanced portfolios
from market timing. In contrast to equities and bonds, bitcoin
returns have also been more volatile on a monthly vs. daily basis,
with both material and sustained drawdowns and rallies. With
such volatile assets, more frequent rebalancing to return totarget weights can increase drawdowns, as investors need tobuy into a drawdown and sell during a rally. But less frequent
rebalancing may introduce unintended market timing risks.
More headwinds from institutional constraints
Institutional asset allocators must also consider other factors
when assessing potential bitcoin investments. First, the overall
size and liquidity of cryptocurrencies is small; the market valueof global financial assets (stocks and bonds) is roughly $200tn
and the above-ground market value of gold is close to $11tn,
while that of bitcoin is only $700bn. And with a multitude ofother, smaller cryptocurrencies already in existence and many
more that might be launched, picking the winning
cryptocurrency is critical. Second, custody and counterparty risks
can be difficult and costly to manage. And third, the potential for
more regulation of the space, in part due to a lack oftransparency and concerns over the carbon footprint of mining,
creates significant uncertainty for investors. All of these factors
may slow broad adoption from institutional investors.

Christian Mueller-Glissmann, Sr. Multi-Asset Strategist
Email:
Tel:

christian.mueller-glissmann@gs.com
44-20-7774-1714

Goldman Sachs and Co. LLC

21

Issue 98

Crypto’s evolution in terms
El

Infrastructure layer
Distributed
ledgerA database that isshared andsynchronized acrossmultiple sites andgeographies by many
participants. Eachparticipant can accessand own a copy of theledger, and allchanges to the ledger
are visible to allparticipants.
Distributed ledgers
have no central
authority; when achange is made to theledger, a consensus
algorithm is used toverify the change.
Information on
blockchain-based
distributed ledgers issecurely stored using
cryptography and canbe accessed using
keys and signatures.

Blockchain

Nodes

MiningForks

A blockchain is a
type of distributed
ledger that stores alist of records
known as blocks.
The Bitcoin
blockchain was
created by Satoshi
Nakamoto in 2008
to solve the doublespend problem ofdecentralized
systems—how toverify without atrusted central
authority that thesame coin was not
spent twice—by
using a “distributed
timestamp server togeneratecomputational proofof the chronologicalorder oftransactions.”

A computer thatruns theblockchain
software andtransmits
information acrossthe blockchain
network. Nodes
are classified
according to theirroles: mining
nodes addtransactions to theblockchain througha mining process;full nodes hold anddistribute copies ofthe ledger; supernodes connect fullnodes to eachother; light nodes
are similar to fullnodes but hold
only a portion of
the ledger.

The process ofverifying andrecordingtransactions
on theblockchain via
a consensus
algorithm.
Miners are
rewarded in
the form of a
block reward.
Bitcoin is amineable
5
cryptocurrency,. all
but not
cryptocurrencies aremineable (seepg. 35 formore detail on
bitcoinmining).

When blockchain
nodes are not inagreement on a
network’s
transaction history
or rules aroundwhat makes atransaction valid,
the blockchain may
fork. Forks canhappen by accident
or intentionally. Softforks are mostly
accidental; there is
still one blockchain
as old nodes cancontinue tocommunicate withnew nodes.
Hard forks areintentional; theblockchain splits
into two as old
nodes cannot
communicate withnew nodes.

Protocol layer
Consensus algorithm
A mechanism by which all
the nodes on a blockchain
network reach a common
agreement about the state ofthe distributed ledger.
Various crypto networks use
different consensus
algorithms; the two mostrecognized are Proof ofWork and Proof of Stake(see pgs. 26-27 for moredetail on which networks use
which consensus algorithm).

Goldman Sachs Global Investment Research

Proof of Work
(PoW)
Used by crypto networks
like Bitcoin and Litecoin,
PoW requires participant
nodes to prove that acertain amount ofcomputational effort has
been expended. PoW
requires a significant
amount of computing
resources.

Proof of Stake (PoS)
Currently used by crypto networks
like Cardano and Polkadot, andplanned for Ethereum in the future,
PoS, unlike PoW, does not involve
solving a mathematical puzzle tovalidate transactions. Instead,participant nodes must stakesome amount of cryptocurrency ifthey want to validate. A random
node is then selected as avalidator based on how much
cryptocurrency is staked, among
other factors.

22

Issue 98
El

Services layer
Digitalasset

Cryptocurrencies

An intangible
asset created,traded, andstored digitally.
Digital assets inthe crypto
ecosystem
includecryptocurrencies
and crypto
tokens.

Native assets of a
blockchain
network thattypically serve as
mediums of
exchange orstores of value. A
cryptocurrency isissued directly by
the blockchain
protocol on which
it runs.
They are typicallydecentralized,
built on a
blockchain, andsecured using
cryptography.
Cryptocurrencies
include bitcoinand ether, thenative asset of the
Ethereum
network, andinitial coinofferings.

Crypto tokens
Unlike cryptocurrencies,
which are native to a
specific network, crypto
tokens are created by
platforms that build on
top of other blockchains.
For example, the tokensof Uniswap and Aave—
UNI and AAVE—are built
on the Ethereum network.
Tokens can be used not
only as mediums of
exchange or stores ofvalue, but also forgovernance decisions(e.g. voting on changes or
upgrades to the protocol)
or to access platform
services.
The most widely used
Ethereum tokens are ERC20 for fungible tokens
and ERC-721 for nonfungible tokens. They
each specify how to build
functional tokens for theirrespective uses.

Initial coinoffering (ICO)

Smartcontracts

ICOs are a way forcompanies to raise
capital. During an ICO,
a company offers
tokens to potential
investors in exchange
for fiat currency or
establishedcryptocurrencies like
bitcoin and ether tofund a project. The
tokens are distributed
via a blockchain
5 One
network.
example .of an ICO is
Filecoin, launched in2017 as a digital
storage platform.

Smart contracts
are selfexecuting
contractswith the terms ofagreement
between parties
written directly
into lines ofcode. Ethereumis the mostpopularblockchain forrunning smart
contracts, which
are typically
written in the
programming
language
Solidity.

Tokens purchased in
an ICO typically do
not provide investors
shares in thecompany, but rather
grant access to theservice or platform.

Smart contracts
are used bydecentralized
applications toconnect to theblockchain.

Applications layer
Decentralized
applications (dApps)
Digital applications that exist
and run on decentralized
blockchains rather than acentralized computer system.
Most dApps are currently built
on the Ethereum network.
dApps are used by a variety ofindustries, including finance as
decentralized finance apps,
gaming, and online gambling.

Decentralized finance (DeFi)
A blockchain-based form of financethat doesn’t rely on centralized
financial intermediaries like banks,
brokerages, or exchanges. Instead,smart contracts are used to offer
users traditional financial services likeloans, derivatives, and insurance.
Similar to dApps, most DeFi
applications are currently built on
Ethereum.

Note: Not intended to provide an exhaustive list of terms for each layer.
Source: Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, CoinDesk, Binance Academy, various news sources, Goldman Sachs GIR.
Goldman Sachs Global Investment Research23Issue 98

Interview with Mathew McDermott
El

Mathew McDermott is Global Head of Digital Assets at Goldman Sachs. Below, he discusses
institutional interest in crypto assets, and Goldman Sachs’ engagement in the space.
The interviewee is an employee of the Goldman Sachs Global Markets Division (GMD), not Goldman Sachs Research, and theviews stated herein reflect those of the interviewee, not Goldman Sachs Research.
Allison Nathan: Goldman Sachs has
had fits and starts in the crypto
space. Why now for a new launch
into the space?
Mathew McDermott: Client demand,
pure and simple. When we originallyexplored creating our own digital
custody offering and launching a crypto
trading desk in 2017/2018, the priceaction was almost exclusively retail led. What’s different today
is the extent of institutional interest, coupled with very strong
demand across the wealth management franchise. The productoffering is broader as people are looking beyond bitcoin at thepotential of the underlying blockchain infrastructure totransform the way markets behave. This has sparked interest inother kinds of cryptocurrencies—ether, dot, etc.—whose value
proposition revolves more around what else can be done on
blockchains. That, together with a more mature crypto market
place with better risk management, execution, and digital
custody, have all made it a bit easier for institutions to digest
and access the market.
Allison Nathan: What’s the nature of your conversations
with institutional clients and their interest in the space?
Mathew McDermott: As a whole, discussions with institutional
clients revolve around how they can learn more on the topic
and get access to the space—as opposed to questions aroundwhat bitcoin or cryptocurrencies are—which was really the main
topic just a few years ago. But beyond that, asset managers
and macro funds are interested in whether or not crypto fits
into their portfolios, and if it does, how to get access to either
the physical—by trading the spot instrument on a blockchain—or exposure through other types of products, typically futures.
Hedge funds, perhaps unsurprisingly, are more active in thisspace, and are particularly interested in profiting from thestructural liquidity play inherent in the market—earning thebasis between going long either the physical or an instrumentthat provides access on a spot basis to the underlying asset andshorting the future.
Corporate treasurers are interested in two slightly different
questions. First, should they be investing in bitcoin on theirbalance sheets? Especially in places where firms face negativeinterest rates and fear asset devaluation amid the extraordinary
amount of fiscal and monetary stimulus in the economy, havingsome portion of their balance sheet in bitcoin rather than paying
to keep cash on deposit or holding negative yielding
government bonds may make sense. And second, should
bitcoin be considered a payment mechanism? I think that’s aweaker argument given the inherent inefficiencies in the Bitcoin
blockchain in terms of transaction speed. PayPal talks aboutallowing the use of bitcoin to pay for items, but behind thescenes a company called Paxos is actually converting bitcoin
into fiat currency, which is then paid to merchants.
Goldman Sachs Global Investment Research

A portion of wealth management clients—high-net-worth
individuals and family offices—are already very active in thespace and in some sense are leading the way for otherinvestors. They remain interested in bitcoin, but are also
increasingly focused on the broader value that cryptocurrencies
can bring. They’re looking at ether in the context of the whole
decentralized finance (DeFi) ecosystem and how that can reallytransform financial markets.
Allison Nathan: There seems to be a debate today about
whether or not cryptocurrencies can be considered an
asset class. Are clients are viewing it that way?
Mathew McDermott: Increasingly, yes. Bitcoin is now
considered an investable asset. It has its own idiosyncratic risk,
partly because it’s still relatively new and going through an
adoption phase. And it doesn’t behave as one would intuitively
expect relative to other assets given the analogy to digital gold;
to date, it’s tended to be more aligned with risk-on assets. Butclients and beyond are largely treating it as a new asset class,which is notable—it’s not often that we get to witness the
emergence of a new asset class.
Allison Nathan: Are you observing FOMO-related pressure
to invest given the extraordinary gains in crypto prices overthe past year, and if so, are you concerned that pricevolatility will diminish client interest?
Mathew McDermott: There’s no doubt that "fear of missingout" (FOMO) is playing a role given how much bitcoin and othercrypto assets have appreciated and how many interested
parties of all flavors have jumped into this space. If you're an
asset manager or running a macro fund and your closest rivals
are all investing and seeing material returns, your investors will
naturally wonder why you are not investing. But I see investor
interest in crypto enduring; we’ve crossed the Rubicon in termsof institutional buy-in, and there is much greater value in thespace than there was three or four years ago.
Allison Nathan: Roughly what percentage of clients thatyou engage with are interested in the space versus actuallyactive in the space?
Mathew McDermott: That is a good question. Last year we
definitely saw many clients exploring rather than executing.
From what we see and anecdotally hear that seems to bechanging. A survey from our Digital Asset team conducted inearly March found that of the 280 clients that responded, 40%
have exposure in some form to cryptocurrencies, with 61%
expecting their holdings to increase over the next 12 months,
and I suspect that would be more now. Another indicator ofincreased activity is the almost 900% yoy increase in CME
bitcoin future daily activity in April.

24

Issue 98
El

Allison Nathan: Goldman Sachs itself is only engaging inthe space in a relatively limited way. Why is that?
Mathew McDermott: It’s true that we are in early days of ourengagement and the regulatory landscape remains in flux, so
we’re only just starting to offer our clients access to the crypto
space. We’re currently transacting non-deliverable forwards,
which we cash settle, and CME futures on bitcoin and ether,
the latter on an agency basis for now. To help facilitate clienttransactions, we expect to trade the bitcoin CME future andcertain pre-agreed upon bitcoin-linked securities on a principal
basis in the near future. From a prime brokerage perspective,
we plan to offer clients the ability to go synthetically long/short
bitcoin-linked securities and exchange-traded notes (ETNs) inEurope. We’re also looking into offering lending structures inand around the crypto space to corporate clients as well as
structured notes. And from a wealth management perspective,
we are gearing up to offer access to cryptocurrencies,
specifically bitcoin, via fund or structured note-like products.
Allison Nathan: How would you rate the liquidity of the
products that we trade today?
Mathew McDermott: Liquidity has increased dramatically overthe past year. Between April 2020 and April 2021, daily bitcoin
dollar spot volume increased from ~$300mn to ~$1.5bn, anddaily CME bitcoin futures volume grew from ~$200mn to close
to ~$2bn. That’s a very clear indication of the inflow of
institutional demand into this market, which has only justbegun. But even though liquidity has increased, it’s still difficultfor institutions to gain access to the market, which remains
quite fragmented. That fragmentation is driving the basis that I
mentioned between going long the physical and shorting thefuture that hedge funds are picking up. And that basis has
fluctuated considerably over the last three to six months.
Allison Nathan: Beyond ease of access considerations,what are some of the custodial/security challenges
institutions face when transacting in the crypto space
today, and how have these evolved?
Mathew McDermott: Digital custody is very different fromtraditional custody in terms of the risks associated withcryptography, public and private keys, etc. But institutions havegotten more comfortable with these risks over the last several
years, for two reasons. One, market participants within thecrypto space are more institutional-grade today as entities andin terms of their offerings—custodial offerings are a lot moresecure and execution and risk management have improved
considerably. Many of these entities are now raising capital in
the public markets, both to further institutionalize their offeringsand credentialize their activities. And two, the quality of custody
both in terms of the technology itself as well as the products
around it have evolved with the market. Security around cold
storage—where the preponderance of institutional assets sits—
has fundamentally improved; multi-signature options areavailable, the private key can be sharded, etc. And insuranceGoldman Sachs Global Investment Researchofferings associated with hot storage, which is more vulnerable
to theft, have also grown, reflecting the greater confidence
from an insurers’ perspective. All of that has helped institutions
feel more comfortable participating in the crypto market.
Allison Nathan: What are you hearing from clients are theirbiggest constraints to increased involvement in crypto?
Mathew McDermott: There are three key constraints. The firstis mandate limitations. For corporates, increased involvement
often depends on whether their board feels such involvement
makes sense given the nature of the company and its
objectives. And some investment funds and asset managers
don’t have the authority to invest a portion of their portfolios incrypto. The second constraint is the ease of access that I
mentioned: how easily can clients gain exposure to the market,
is the liquidity sufficient to meet their needs, and are they
comfortable enough with the custody and security aspects ofmanaging these assets? And the third constraint, perhaps morephilosophical, is whether having crypto exposure is the rightthing to do and makes sense for their portfolios, balance
sheets, etc. But as evidenced by the increased inflows, more
and more entities are becoming comfortable with having some
exposure to the crypto space.
Allison Nathan: Do you hear concerns from investors about
the environmental footprint of proof of work crypto assets
like bitcoin, especially given increased investor focus on
ESG today?
Mathew McDermott: A number of potential investors havevoiced concerns and understandably want to delve more intothat aspect of crypto assets and really understand it. Generally,
the environmental concerns have not caused investors to fully
close the door, but they are looking at improved sustainability
options. Investors are intrigued to hear about miners leveraging
renewable energy sources to mine crypto assets. And carbon
neutral funds are emerging, that, for example, calculate thecarbon cost of crypto mining, and buy credits to offset theirenvironmental impact.
Allison Nathan: What risks worry you the most as we andour clients increase engagement in the space?
Mathew McDermott: A key concern is inconsistent regulatory
actions around the globe that impede the further developmentof the crypto space, or the ability of more regulated entities toengage within it. It feels like the regulatory tone has turnedmore constructive, but I certainly wouldn’t want to becomplacent. And the other major concern is fraud, both interms of storage and nefarious activity on the blockchain.
Particularly as it relates to hot storage, we’re only one big fraud
away from a very negative impact on the market. But it’sreassuring to watch large crypto companies with significant
increases in assets under management actually manage thatgrowth without any noticeable increase in fraudulent activity.

25

Issue 98

Top coins and tokens
El

Name/
Marketcap

Bitcoin(BTC)$700bnEthereum(ETH)$285bnTether(USDT)$58bn

Binance
Coin
(BNB)
$52bn

Currency

Smart contract
application platform

Stablecoin

Currency/
application/utility

Background/Objectives

2009

The first cryptocurrency, established toallow peer-to-peer transactions without
the need for a trusted third party.
Transactions are verified by network
nodes and recorded on the blockchain.

2015

The most actively used blockchain,established to enable the creation anduse of smart contracts anddecentralized applications. Ether is
Ethereum’s native cryptocurrency.

2014

Originally designed as a stablecoin—
aiming to be fully backed by a fiat
currency—it was later found that eachtether was not fully backed by US
Dollars at all times.

2017

2017

Dogecoin(DOGE)$43bn

Currency

2013

Currency

2012

Internet
Computer
(ICP)
$15bn

Issued by the Binance cryptocurrency
exchange, Binance Coin is used to pay
for fees on the exchange. While it
originally operated on the Ethereum
blockchain, BNB had its own mainnet 1
launch in 2019.

18.7mn/21mn

115.9mn/unlimited

58bn/
unlimited

153.4mn/
170.5mn

2F

Smart contract
application platform

Polkadot
(DOT)
$24bn

Current/
Maximum
supplyEstablished

Cardano
(ADA)
$47bn

XRP
$38bn

1

Function

Smart contract
application platform

Smart contract/dataplatform

Cardano is a public blockchain
established to enable the creation anduse of smart contracts while focusing
on scalability and interoperability. Ada is
Cardano’s internal cryptocurrency.
Named after the Shiba Inu meme andcreated as a “fun” alternative tobitcoin, dogecoin is a peer-to-peer,
open-source cryptocurrency. Dogecoin
is a fork of the luckycoin blockchain.
XRP is a real-time settlement system,exchange, and remittance network thatfacilitates cross-border payments forfinancial institutions.

2017

Polkadot is designed to provide
interoperability between otherblockchains. Polkadot features “sharedsecurity”—developers can create theirown blockchains on the system whilestill having access to Polkadot’ssecurity.

2021

Internet Computer is a publicblockchain that extends thefunctionality of the public internet toallow it to host back-end software. This
enables developers to create websites,
enterprise IT systems and internet
services by installing code directly onto
the public internet, bypassing server
computers and commercial cloudservices. ICP is Internet Computer’sutility and governance token.

31.9bn/45bn

130bn/
unlimited

46bn/
100bn

Consensus
mechanism
Proof of work (oneparty proves to theother that a certain
amount ofcomputational effort
has been expended)
Currently proof ofwork, but moving to
proof of stake
N/A; USDT tokens run
on the Algorand, BCH,
EOS, Ethereum, Liquid
Network, Omni,
Solana, Tron
blockchains
Proof of stake(randomly assigns thenode that willmine/validate,partially according to
the number of coins anode stakes)

Proof of stake

Proof of work

A network of servers
validates transactions
through a custom
consensus algorithm

939mn/
unlimited

124mn/
unlimited

Proof of stake

Independent data
centers operate
standardized
computer nodes, andare rewarded for thetime that theycorrectly operatethese nodes(currently 48 data
centers run 1,300
nodes)A testnet is used by developers to test and troubleshoot all the features of a blockchain network. After a successful testnet, a mainnet version of theblockchain is launched, and all transactions are broadcast, verified, and recorded. The mainnet phase also sees the deployment of a native token rather
than the previously issued Ethereum-based token, which is swapped for the new token during a process known as the mainnet swap.

Goldman Sachs Global Investment Research

26Issue 98El

Name/
Marketcap

Function

Established

USD Coin(USDC)$14bn

Stablecoin

2018

Bitcoin
Cash
(BCH)
$13bn

Currency

2017

Uniswap
(UNI)
$13bn

Governance token

2018

Litecoin
(LTC)
$13bn

Currency

2011

Aave
(AAVE)$5bn

Governance token

2017

Monero(XMR)$4bn

Privacy currency

2014

Algorand(ALGO)$3bn

Smart contract
application platform

2017

Current/
Maximum
supplyBackground/Objectives
USDC is a stablecoin running on the
Ethereum, Stellar, Algorand and Solana
blockchains. USDC is fully backed by
the US Dollar, with Centre—the
consortium that mints USDC—holding$1 for every coin in reserves.
Another fork of Bitcoin, bitcoin cash
was created to facilitate the use of BTC
as a medium of exchange rather thanthe original store of value purpose.
BCH does this by increasing the speed
at which transactions are processed via
larger blocks.
Uniswap is a decentralized finance (DeFi)
platform running on the Ethereum
blockchain on which users trade
cryptocurrencies and tokens. UNI is theplatform’s governance token, giving users
the right to vote on new developments
and platform changes.
A fork of Bitcoin, Litecoin was createdwith the goal of speeding up
transaction times, which it achieves byutilizing a different cryptographic
algorithm than BTC.
Aave is a decentralized non-custodialmoney market platform that allows
users to lend and borrow crypto assets.
AAVE is the Ethereum-based, native
governance token of the platform.
A privacy-focused cryptocurrency,
Monero aims to make transactions
untraceable and unlinkable through theuse of ring signatures and stealthaddresses.
Algorand is a blockchain built by MIT
professor Silvio Micali that supports
DeFi applications and smart contracts,
built on scalability as its most importantprinciple, but also on open participation,
security, and transaction finality.

14.4bn/unlimited

Consensus
mechanism

N/A; USDC tokens
run on the Ethereum,
Stellar, Algorand, andSolana blockchains

18.7mn/Proof of work

21mn

N/A; UNI tokens run
on the Ethereum
blockchain

565mn/
1bn

67mn/

Proof of work

84mn

12.8mn/16mn

N/A; AAVE tokens
run on the Ethereum
blockchain

17.9mn/Proof of work

18.4mn3bn/

Proof of stake

10bn

Bitcoin’s market cap has fallen over time as new coins have gained market share100%

Bitcoin

Ether

Binance Coin

XRP

Dogecoin

Other

90%
80%
70%
60%
50%
40%

Bitcoin: 85%
Ether: 5%
XRP: 1%
Dogecoin: 0.1%
Binance Coin: 0%

30%
20%

Bitcoin: 40%
Ether: 19%
Binance Coin: 4%
Dogecoin: 3%
XRP: 2%

10%
0%
2015

2016

2017

2018

2019

2020

2021

Note: Table does not constitute an exhaustive list of all cryptocurrencies/altcoins/tokens; data as of May 19, 2021.
Source: Underlying whitepapers, Coinbase, CoinDesk, CoinMarketCap, various news sources, Goldman Sachs GIR.
Goldman Sachs Global Investment Research27Issue 98

Interview with Alan Cohen
El

Alan Cohen served as Senior Policy Advisor to former SEC Chairman Jay Clayton from 2017 to
2021, and was the Global Head of Compliance at Goldman Sachs from 2004 to 2017. Below,
he discusses the current state of cryptocurrency regulation in the US.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: How do regulators
treat crypto assets today—assecurities, commodities, currencies,
or something else?
Alan Cohen: No single US regulator
oversees all aspects of crypto assets.
Different regulators are focused on
different applications and functions ofblockchain technology. For example, if
the financial institution that is acting as
a custodian of a cryptocurrency is a bank, then the relevantbanking regulator—the Office of the Comptroller of the Currency(OCC), the Fed, or the FDIC—will issue rules or guidance on
how that custody function should be performed. The OCC did
just that in late 2020, authorizing regulated banks to participate
in certain blockchain nodes, to custody client cryptocurrency
assets and to facilitate cryptocurrency payments. It makes sensethat banking regulators would prescribe how regulated banks
under their supervision should address this class of assets.
Allison Nathan: How focused are regulators on
cryptocurrencies today, and what areas are they most
focused on?
Alan Cohen: The SEC and other US financial regulators are
increasingly focused on cryptocurrencies and blockchain
technology as the space continues to evolve. Regulatory activity
will almost certainly focus on three main areas in which crypto
assets have the potential for greatest market penetration anddisruption—application of distributed ledger technology (DLT) to
facilitate financial transactions, the use of crypto assets and theblockchain to make payments, and investing in crypto assets asa store of value. Many companies have sought to deploy DLTthat allows parties to record, track, verify and store transactionsof value, e.g., financial and real estate transactions, without theneed for a trusted intermediary to verify the transaction, and in a
way in which the stored information is impervious to tampering
or destruction.
The application of DLT to highly regulated activities in financialtransactions is still in its infancy, with both large and small
players developing solutions and applications. For example, in
the area of securities transactions, firms are undertaking thedigitization or tokenization of shares or other securities ofcompanies, the trading of those digital securities, the clearing
and settlement of those transactions, and the recording of thosetransactions and the ownership of assets—to name just a few
applications. Insofar as these innovations will perform highly
regulated market functions, the regulators in those areas—suchas the SEC in the previous examples—will need to consider
whether existing regulations are sufficient to cover these new
applications or whether new rules are required. An example ofthis type of review was the recent SEC guidance on how brokerdealers could custody digital assets, which has enabled greater
custody of digital assets by registered broker-dealers.
Goldman Sachs Global Investment Research

A second major area of regulatory focus is the application ofblockchain technology to fiat currency and the global payments
system, which appears to be heading toward a new digital era.
On the global stage, the Financial Stability Board (FSB)—
comprised of G20 Finance Ministers, central banks, the Bank forInternational Settlements (BIS) and other internationalorganizations and global standard-setting bodies—is hard at workon an overhaul of the global payments system that will likely
embrace crypto assets in the form of fiat digital currency. That
new system will replace or supplement the existing SWIFT
system that has been the backbone of the global bank-to-bankpayments system for decades. These digital currencies are likely
to be in the form of sovereign fiat currencies, e.g., a digitaldollar, euro or yuan. Of course, China has already begun to
implement a digital yuan domestically, which will give its
government more control of and transparency into the use of its
currency in China. This has set off a global race to adopt fiat
currency in digital form. Various European countries have begun
to investigate their own digital currencies and the US Treasury
and the Fed have announced that they are studying thepossibility of a digital dollar.
The implication of fiat digital currencies for existing
cryptocurrencies is unclear. But let’s not forget the old adage,“Don’t bet against the Fed.” You might modify that to say:“Don’t bet against the central banks of the world” to relinquish
control over their money supply and currency. The evolving
regulation of stablecoins—digital assets designed to track anunderlying fiat currency or basket of such currencies—provides
some insight into the future of cryptocurrency regulation in the
US and elsewhere. In an October 2020 FSB Report, the firstrecommendation tells you all you need to know: “Authorities
should have and utilize the necessary powers and tools… tocomprehensively regulate, supervise and oversee a [global
stablecoins] arrangement and its associated functions andactivities, and enforce relevant laws and regulations effectively.”That was followed in December 2020 by a statement released in
the US by the President’s Working Group on Financial Markets,
which is composed of the leading federal financial regulators,
encouraging innovation. But the statement went on to makeclear that (1) stablecoins must comply with applicable US legal,
regulatory and oversight requirements; and (2) stablecoin
participants and arrangements must meet all applicable antimoney laundering (AML) and counter-terrorist financing andsanctions obligations before bringing them to market.
A proposed set of regulations was also issued by FinCEN in
December 2020, which the Biden administration will need to
finalize. The proposed regulations are designed to ensure thattransactions in cryptocurrency are broadly subject to the same
AML and related controls as other forms of payment. Those
regulations are entirely consistent with the Financial Action Task
Force (FATF) standards applied broadly across the globe toprevent AML and terrorist financing. It’s difficult to imagine thatcryptocurrencies in whatever form will not be subject to those28

Issue 98Elsame requirements. Financial regulators spent decades doing
away with bearer bonds because of the AML, fraud and tax
evasion risks posed by the instrument, and it’s unlikely that
global regulators will permit cryptocurrencies to take their placein the global financial system. The bottom line is that theanonymity promised by some crypto assets will inevitably meet
intense regulatory opposition. The third main area of regulatory
focus is cryptocurrencies as a store of value, as an increasing
number of institutional and retail investors are focused oninvesting in cryptocurrencies as an asset class with growthpotential. Regulators and investors want markets that aretransparent, fair and well regulated. But a very significant
percentage of trades—some claim in excess of 90% of all
trades—in these assets takes place on markets that are nottransparent or regulated in a manner consistent with global
market regulatory standards. The notorious instances of clientslosing their money when brokers were hacked, custodiansdisappeared, or market prices were allegedly manipulated partly
reflect this lack of regulation. This dearth of regulation will likely
remain a key challenge for the cryptocurrency ecosystem.
Allison Nathan: Given these different areas of regulatory
focus, which crypto assets is the SEC focused on?
Alan Cohen: The SEC is focused on crypto assets that are, in
effect, securities. In the period between 2017 and 2020, theSEC was very active in pursuing securities fraud and other typesof cases against Initial Coin Offerings (ICOs) that were securities
masquerading as currencies or commodities. If an offering is asecurity, then the offering must be done pursuant to the
Securities Act of 1933 and trading must occur in a mannerpermitted under the Securities Exchange Act of 1934, or under
exemption to the requirements under those Acts.
Allison Nathan: How does the SEC decide if a crypto asset isa security?
Alan Cohen: The SEC’s Decentralized Autonomous Organization(DAO) Report discusses the elements that the SEC considers indeciding whether a digital offering is a security. As outlined inthat report and in subsequent SEC cases, the SEC applies a test
set forth in a Supreme Court case, the so-called Howey test, todetermine if the offering is a security. Among other factors,
Howey test elements include (1) investment of money, (2) in acommon enterprise, and (3) with a reasonable expectation of
profits derived from the efforts of others. With this in mind, we
can distinguish between three types of crypto assets: asset or
equity tokens, which represent a claim on an issuer, tokens thatare meant as a means of payment or exchange, such as bitcoin,
and utility tokens that represent a right to have access to some
digital application or service. The first group is considered asecurity, while the second and third groups generally are notviewed as securities. SEC officials have publicly stated that
Bitcoin and Ethereum are sufficiently decentralized networks
that neither bitcoin nor ether are securities. And the SEC
established the Strategic Hub for Innovation and Financial
Technology to foster innovation in DLT, including by providing
clear guidance that utility tokens are not securities.
Allison Nathan: What if the SEC finds that an ICO shouldhave been registered as a security and was not?
Alan Cohen: Under US securities laws, a sale of a security
confers certain rights to the buyer—including the right to get
Goldman Sachs Global Investment Research

their money back, a so-called “right of rescission”—in the eventthat a securities offering should have been registered and was
not—as was the case with some ICOs—or if there was fraud inconnection with that offering. Two recent cases illustrate thatthe sale of unregistered securities to investors can have serious
consequences for issuers. The SEC successfully sued Telegram,alleging that Grams were unregistered securities. The court
agreed, and Telegram had to return the money from the sale ofGrams to its investors. In another case, the SEC sued Kik
Interactive over its offering of a “Kin” token, which the court
preliminarily agreed was a security. There is also a pending casebrought by the SEC against Ripple Labs, Inc. and others over its
sale of XRP on the same theory. That’s a case worth watching.
Allison Nathan: What will it take for the SEC to approve a
cryptocurrency ETF?
Alan Cohen: A number of firms have announced their intention
to offer such a product. The SEC’s mission to protect investors,
maintain fair, orderly and efficient markets, and to facilitate
capital formation will be sharply in focus as regulators assess
whether a cryptocurrency ETF should be approved. Indeed, aprerequisite, among other things, for a cryptocurrency ETF willbe that regulators and investors are satisfied that underlying
market prices are fair, accurate, and transparent. And the recent
bout of volatility doesn’t provide much comfort in this regard.
Allison Nathan: If bitcoin and ether are not securities, doesthat mean that the CFTC regulates trading in them?
Alan Cohen: Not exactly. The mission of the CFTC is “topromote the integrity, resilience, and vibrancy of the US
derivatives markets through sound regulation.” That means that
the CFTC regulates the derivatives market, but does not directly
regulate the underlying market. The CFTC regulates trading in
the CME-listed bitcoin and ether futures contracts. In certain
instances, it will look through to trading in the underlying market
insofar as it impacts the futures market. But it does not regulatethat underlying market.
Allison Nathan: Do states regulate the underlying market?
Alan Cohen: New York has been one of the most active statesin this space. In 2015, the New York State Department of
Financial Services issued regulation for a “BitLicense,” whichallows firms to create, issue, transact, and custody virtual
currencies. The purpose of the license is to regulate what it calls“Virtual Currency Business Activity”. New York and other states,
including Utah, have also amended their banking or trust laws in
an effort to foster innovation and capture a share of the future
revenue stream associated with this activity.
Allison Nathan: Shouldn’t there be a single federal agency
responsible for the regulation of cryptocurrencies?
Alan Cohen: Not necessarily. What is required is close
coordination with and on the federal level and amonginternational standard-setting bodies—the FSB, BIS, International
Organization of Securities Commissions (IOSCO) and others.
Because of the multitude of applications of blockchain
technology across the spectrum of financial transactions—frombanking to securities markets to payments to investing—the
relevant federal authorities that oversee those markets are best
able to assess the benefits and the risks of this technology inthose regulated areas.
29Issue 98

Interview with Dan GuidoEl

Dan Guido is Co-Founder and CEO of Trail of Bits, a software security research anddevelopment firm specializing in blockchain software and cryptography. Below, he discusses
security risks inherent in cryptocurrency blockchains, as well as in smart contracts.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: How secure is theblockchain that underlies bitcoin andother cryptocurrencies?
Dan Guido: There are two main facetsof blockchain security: the security ofthe software and the security of how
the distributed network is run. Nobody
would expect that software written in
C++ with its own custom network
protocol running on globally distributed machines that provides
millions—if not billions—of dollars for a successful hack would
be secure, but most of the software running cryptocurrency
networks is generally fairly safe. And we know that because, atleast for Bitcoin, the software is relatively mature, so a lot ofeyes have been prying into it for a long time, and we haveactually done source code audits on much of it. But we also
know that because there’s a massive reward for not being
secure, which no one has reaped. That being said, I would not
be surprised if a high severity vulnerability in Bitcoin software
was revealed tomorrow. But relative to other blockchain
software, it is relatively safe.
Beyond the software itself is the fact that the blockchains that
underlie Bitcoin, Ethereum and other crypto networks have nocentral authority that controls them. Volunteers run nodes—
entities that come to a distributed consensus—that accept
transactions and attempt to get them incorporated into theblockchain. And then miners compete against each other toconstruct new blocks on the blockchain. The incentives in that
distributed protocol are interesting and sensitive.
People commonly discount the risk of an adversarial network
attack on a cryptocurrency blockchain, believing that everyone
on a blockchain has an economic incentive to keep it going—that there’s more money in a network that’s running than in a
network that’s not. But there have been attacks on blockchains,and it’s possible that certain chain forks attributed to bugs in aconsensus protocol were actually deliberately triggered byattackers. We need to remember that some bad actors justwant to see the world burn. And current state-level efforts in
China and other countries to implement a nationally anointed
cryptocurrency make me wonder if public blockchains may
become persona non grata in those countries, opening thefloodgates for adversarial network attacks by foreign nationstates with the resources to pull them off.
Allison Nathan: What form would such an attack take, andhow difficult would it be for a bad actor to execute one?
Dan Guido: An oft-discussed threat is the so-called 51% attack
in which a single entity gains control over 51% or more of themining power in the world, allowing it to invalidate theimmutability properties of the blockchain to rewrite history orcause what’s called a double-spend: Suppose Alice tries to giveBob and Eve one bitcoin each, but Alice has only one bitcoin. If
those two transactions are submitted to the blockchain at theGoldman Sachs Global Investment Researchsame time, it’s almost arbitrary which one will be executed first,
but the one executed second will fail. Someone with 51%
control of the network can make them both succeed. It’s almost
impossible to know for certain where miners are locatedgeographically, but there’s evidence that a significant portion ofthem are concentrated in China, likely due to energy resource
availability; several weeks ago, a gas explosion and flood in acoal mine in the Xinjiang region led the Chinese government toshut down all the neighboring cryptocurrency mining farms to
conduct fire safety inspections. That was the morning of April
16, and by the end of the day, Bitcoin’s global hash rate had
dropped by 50%.
But even with less than 51% of the mining power, bad actors
with control over a majority of a blockchain’s nodes can still
conduct nefarious activities like denying service to specificusers. For example, a nation-state could use their nationwide
firewall to block all traffic for a specific Bitcoin address.
Importantly, if someone were to manipulate the network in sucha way, it could be done so subtly that detecting it would bealmost impossible.
Allison Nathan: Have any bad state actors tried to engage
in that type of activity?
Dan Guido: To my knowledge, there is no evidence that any
state actor has directly targeted the stability of the network,
although significant nation-state activity has occurred on
cryptocurrencies themselves. Russia has heavily usedcryptocurrencies over the last few years. North Korea has
mostly focused on attacking endpoints like exchanges anddigital wallets. But non-nation-state bad actors have attempted
to financially manipulate the network to gain an edge on specificepochs of time to sneak a transaction in and somehow benefit.
That’s occurring particularly on the Ethereum network, where
many decentralized finance (DeFi) and other activities amenable
to exploitation are located.
Allison Nathan: So how can institutional investors getting
involved in the space safely engage in it?
Dan Guido: Two important ways: through safe exchanges andsafe interactions with an exchange. There’s a mantra in someparts of the blockchain industry, “not my keys, not my bitcoin”,
which essentially advocates taking your private keys—and, thus,
your bitcoin—shoving them under your mattress, and hoping
they don’t get stolen. That’s a bad idea. Institutions and people
more broadly should be storing their cryptocurrencies on a
reputable exchange. But the security of an exchange is not
obvious from the outside. Exchanges exist today that have nobusiness being exchanges, operating in unregulated markets or
as pure crypto exchanges without any exposure to fiat currency
to avoid regulation. Just last month, the CEO of a Turkish
cryptocurrency exchange allegedly stole $2 billion from theexchange’s users. And riff-raff in the space just flying by theseat of their pants and getting hacked is prevalent. But the top
10% of centralized exchanges probably have enough resources30Issue 98Eland maturity to have invested in their own security well enoughto protect users’ investments. They generally also have ways toarchitect their internal systems through a segregation of
resources, key management, and fund movement processes
such that a potential compromise of the exchange wouldn’t becatastrophic. And some of them have built checks into theiruser interfaces to ensure money isn’t being sent to a null
address—which would prevent the funds from ever being
accessed again—due to something like a fat-finger mistake.
But the other point of vulnerability is the device used to interact
with the exchange. Setting up a high-risk machine like an iPad or
Chromebook that is used only to interact with an exchange
instead of a general-purpose machine is generally the safest
route to take. As long as you’re doing that, the likelihood of yourcomputer being infected with surreptitious malware or
ransomware that will steal your cryptocurrency is pretty low.
And that’s important because once those funds are gone,
they’re unrecoverable.
Allison Nathan: Why are they unrecoverable if all theactivity on public blockchains is transparent?
Dan Guido: It’s true that you can see exactly where thecryptocurrency went, but it’s difficult to map that to the point at
which a human connects to the blockchain. Funds can also belaundered through different blockchains, and services liketumblers and those that use zero-knowledge proofs can help
obfuscate where the cryptocurrency came from. And even if
you know exactly who perpetrated the crime, if they’re in adifferent jurisdiction you may have no legal recourse.
Allison Nathan: How much of a risk does quantum
computing—which could make current encryption
obsolete—pose to blockchains?
Dan Guido: I’m not currently worried about that risk, bothbecause there are more significant use cases for quantum
computing than breaking Bitcoin’s cryptography and because
technologically, we’re not there yet. In order to break crypto
with a quantum computer, you would need a computer muchlarger than what exists today. And even though quantum
computers have been demonstrated to work on a small scale,as the number of qubits scales up, more noise is introduced into
these systems, which prohibits them from runningcomputations. So quantum computers have significant
fundamental problems to overcome before they can reach thescale and size capable of impacting crypto in any meaningfulway.
By the time that quantum computers do become usable for real
work, we’ll likely have a really solid, well-reviewed suite of
cryptography algorithms to rely on. Some quantum-resistantalgorithms have already been submitted to the National
Institutes of Standards and Technology (NIST) as potentially thenext big standard, although one of them was broken by highschoolers on the back of a napkin. So they’ve not yet been
proven to work, and their trade-offs and weaknesses areunclear. But we will likely have reliable quantum-resistantalgorithms within the next five years, and as an industry we’ll
have a 10, 15, or 20-year head start on implementing thosealgorithms. Quantum computing is the slowest-moving problem
in computer security today; we’re going to see it coming from athousand yards away.
Goldman Sachs Global Investment Research

Allison Nathan: How secure are today’s smart contracts?
Dan Guido: We frequently find vulnerabilities in the smart
contracts we review. A few months ago we ran Slither—a tool
we developed to detect vulnerabilities in smart contracts—on
2,000 new contracts posted to the Ethereum blockchain over anine-day period. About half of them had known vulnerabilities.
Of those, on average, each contract had ten known vulnerable
patterns and at least one high severity vulnerability. That’s theconsequence of having tools that are really difficult to build
secure software with. It’s a wild west out there for developers
building applications on the blockchain. Solidity—the language
being used—has dozens of different foot guns and opportunities
for failure. Developers are generally on their own using stone
tools to cobble together houses built of balsa wood andcardboard and trying to scale them up to 20 stories high in aneighborhood that constantly gets lit on fire.
That said, a few firms made early investments in software
testing tools that allow them to apply techniques like symbolic
execution, abstract interpretation, and security property testing,and have produced highly reliable software capable of managing
billions of dollars. But a huge amount of churn exists at thebottom of the market where companies have no access toexpertise and no experience of their own, and many end up
deploying software that explodes in their faces almost
immediately. And even systems that pass formal security
evaluations aren’t necessarily secure. Only about half the bugs
we find in our security reviews are amenable to being formally
proven. Proving the other half requires a human brain, because
they’re logical in nature, deal with interactions between thesystem and the world at large, or just can’t be modeled with amachine. So a tremendous amount of risk remains, even when
everything is done right on the code security level.
Allison Nathan: So what worries you most about theunderlying technology and infrastructure of the crypto space?
Dan Guido: Smart contracts concern me because the potential
for one incident to affect the entire industry is really large. It’s
akin to being an insurance provider in a world where every
house is built on the beach in Florida. And it’s also important torecognize that very few DeFi systems are truly decentralized;
almost all of them have a centralized backdoor or a set of private
keys that allow the owner to manipulate account balances or
the functionality or state of the system. So the systems are nottrustless, even though they’re advertised that way, making it
necessary to have trust in the company that deploys the smart
contract and the security assessments it utilizes. It’s not enoughthat an external security firm produced a report; a company may
have hired the firm only to do a week-long assessment when
the project’s size requires an eight-week assessment. As aresult, the security firm will likely have missed something.
And even when secure code is deployed, if the functionality of
the underlying blockchain has changed—which, for example,
happens every few months on the Ethereum blockchain as it
forks—that may inadvertently make existing contracts insecure.
So a preponderance of evidence is needed to assess security.
That means having an educated team with industry experience,
security standards, authentication systems, key management,
and regular external security reviews. A single data point isn’t
enough; security needs to be thought about holistically.
31Issue 98

Interview with Michael Gronager
El

Michael Gronager is Co-Founder and CEO of Chainalysis, a leading blockchain data,
investigations, and compliance company, and was a co-founder of the cryptocurrency
exchange Kraken. Below, he discusses the extent to which bitcoin and other cryptocurrencies
facilitate illicit activity.
The views stated herein are those of the interviewee and do not necessarily reflect those of Goldman Sachs.
Allison Nathan: Cryptocurrencytransactions are commonly
perceived to be associated with
illicit activity. What does youranalysis suggest?
Michael Gronager: Cryptocurrencies
are by design permissionless valuetransfer networks that enable anyone
in the world to access and transfer
funds. In the early days ofcryptocurrencies, this ease of access created a perception thatthey were an anonymous global money system everyone could
use, which attracted interest from criminals. But the interesting
thing about blockchain is that every single transaction is public,
immutable and never disappears. This visibility has enabled us
to create a map of the entire crypto network based on everytransaction on the blockchain which, combined withintelligence from the public and private sectors, provides a fairly
comprehensive view of the entire crypto ecosystem. By using
this map, and looking at different patterns of behavior and theentities involved in transactions, we can track the amount offunds that are being used for various purposes, including
legitimate investment and illicit activity. Our analysis showsthat in 2020 total illicit activity accounted for around 0.34% of
all crypto transactions. That's down from around 2% of alltransactions in 2019, much of which was dominated by a single
large Ponzi scheme. Scams are a major use case among
criminals that abuse crypto. So a very small share of all cryptotransactions today are illicit, which is quite different from thegeneral perception that cryptocurrency activity is dominated bycriminals.
Allison Nathan: How certain can you be of the accuracy ofthese figures?
Michael Gronager: We are very confident in what we know,
as we have a very rigorous, high bar for attributing services toblockchain activity. While it’s true that we don’t necessarily
know every entity on the blockchain—especially the smaller
ones—the combination of our machine learning andcollaboration with customers and partners gives me confidence
that we have accurate estimates.
Allison Nathan: How do you identify an illicit transaction?
Michael Gronager: The map that we've created is basically amap of every entity that transacts on the blockchain, including
exchanges such as Binance in Asia and Bitstamp in Europe,
blockchain service providers like BlockFi, gaming sites,
payment providers, and even Tesla, which accepts bitcoin forvehicle purchases. By identifying certain entities that provide
illicit services, it's possible to track all of the activity thattouches those entities via the blockchain. Further, mostlegitimate entities typically check the identity of their
Goldman Sachs Global Investment Researchcustomers. For example, when a customer opens an accountwith a regulated bitcoin exchange in the US, they have to
identify themselves in the same way as when opening a bankaccount. This usually includes a thorough "know your customer"(KYC) process. What KYC entails is not always standardized,
and it could involve everything from requiring a customer to
upload their passport to jumping on a video call to confirm theiridentity. For smaller transactions, KYC rules might only involve
confirming a person's phone number and location via a third
party. And even though we can’t see the identities of private
wallet owners, if a law enforcement agency sees criminal
activity associated with a wallet, they can subpoena the crypto
exchange where the individual bought their cryptocurrencies
for the personal information associated with the wallet, whichallows them to identify the owner and investigate further.
Allison Nathan: But don’t the majority of cryptocurrencytransactions take place on exchanges that aren't regulated
and don't comply with KYC and anti-money laundering(AML) protocols?
Michael Gronager: The extent of non-compliance has likely
been overstated. When I was running Kraken in 2012/13, we
logged into all of the major exchanges to see what information
they asked users for, and every one required some level of KYC
information. Many exchanges that are not formally regulated
still comply with standard KYC protocols in practice. Up until
last year, for example, there was no regulatory framework for
public crypto exchanges in Europe; while some countries had
individually rolled out requirements, theoretically manyexchanges in the EU could onboard customers without asking
for any identification. But most exchanges still collected
information on their clients. And there are many other digital
breadcrumbs that can enable the identification of a user andfacilitate an investigation of criminal activity.
Allison Nathan: So what share of transactions do you thinktake place on exchanges that don't comply with KYC?
Michael Gronager: I wouldn't attempt to cite a specificnumber, but I am confident in saying that a majority of crypto
exchanges are collecting some level of identification fromusers. Some that don't are peer-to-peer (P2P) exchanges thatfacilitate people meeting on the street with only a username. In
this situation, the transaction is an exchange of cash for crypto,
which can be completely anonymous. But many P2P
exchanges collect KYC information now too. Another example
is some online sites operating out of Eastern Europe where thelack of identification is almost a feature. But people may beafraid to use such sites given the lack of protection. And evenin cases where a transaction is associated with an exchangethat isn’t KYC complaint, the wallet will likely have transactedwith someone that has been identified. So it usually only takes
a few steps to identify individuals on the blockchain.
32

Issue 98
El

Allison Nathan: What about darknets? Aren’t they difficult
to identify?
Michael Gronager: It’s true that darknet markets that facilitate
the purchase of weapons, drugs, and other illegal products andservices online operate on the "dark web"—parts of the internetthat are encrypted or otherwise difficult to access. They also
often provide instructions for how users can try to obfuscate
their transactions. But despite such efforts, we can generally
map out these markets and see their traffic. Once an operation
is identified as involving criminal activity, the size and scope ofthat activity can be tracked because it happens on theblockchain.
Allison Nathan: But isn't it possible that there are darknet
markets out there that you haven’t uncovered?
Michael Gronager: Yes, but the whole idea of a market—
whether it’s on the darknet, clearnet, or in person—is to attract
customers. To get a customer base, they tend to market theirproducts or services via darknet forums, or some can even be
found through a Google search. So, some darknet markets may
be really bad at marketing and therefore remain undetected,
but that would also probably mean that they don't have manyusers and only account for a small share of illicit activity. Even if
we can’t identify a darknet market, we can oftentimes identify
an entity that looks like a criminal service simply because of its
patterns and activities.
Allison Nathan: What patterns do you look at to identify
illicit activity?
Michael Gronager: Entities or wallets engaged in illicit activity
will try to obfuscate their transactions by enlisting services
such as mixers or coinswaps, where someone can swap
bitcoin for privacy coins that better preserve their anonymity.
An entity interacting with a service like this would be flagged.
And as in the case of darknet markets, the mixers on theblockchain are public in the sense that they need a website inorder to acquire a customer base, making them easy toidentify. The harder part is identifying the users sending funds
to these services. But they don’t provide 100% obfuscationfrom blockchain analysis.
Allison Nathan: Is illicit activity involving fiat-to-crypto
exchanges, such as money laundering, captured in what
you track?
Michael Gronager: To some extent. Activities like money
laundering typically start with criminal funds, which can be
identified. A transaction that wouldn’t be captured is a drug lordthat buys $10 million of bitcoin on the street and then places it
on a P2P exchange. We would not have identified that because
it's basically the job of traditional investigations to flag that themoney had a criminal tie before it ended up on the exchange.
These transactions aren’t well captured because we have no
way of knowing from the onset that they’re criminal.
Allison Nathan: But doesn't that mean that yourmethodology likely misses a lot of illicit activity?
Michael Gronager: That's true in principle. But it's hard to say
why someone looking to hide this type of illicit activity would

Goldman Sachs Global Investment Research

move into crypto. If you already have cash, crypto is not thebest instrument for money laundering. It would make more
sense, for example, to build a house and pay the workers incash and then sell the house than to send funds via crypto
where they leave a trace. So it could be done, but I doubt it
accounts for a large amount of activity. Crypto transactions only
really make sense in facilitating illicit activity that happens
online, where using cash isn’t possible, such as buying drugs ora weapon that are mailed to you. As soon as you transact inperson, cash is a better anonymity-preserving instrument thancrypto, because it leaves no trace. For anything that happens
physically, cash is king.
Allison Nathan: What about financial crimes such as tax
evasion? Is that captured in your numbers?
Michael Gronager: Someone recently asked me whether the
recent rise of crypto prices has been driven by a rise in tax
evasion. But that seems unlikely because taxes are typically
filed around the end of the year, so that wouldn’t account for
the rise in prices since the start of the year. There probably isquite a lot of evasion in the sense of people not paying taxes
owed on crypto gains, though. Guidance on these tax liabilities
remains unclear, but those taxes will likely have to be paid atsome point. But the main point is that blockchain and crypto
aren't simply online enablers of all bad activity and dark money.
What they help with is the ability to move money earned
through illegal activity abroad more easily and possibly evade
recourse so long as they're in a jurisdiction that's unlikely topunish them. But that arguably happens already with wiretransfers and a lot of other schemes where financial proceeds
end up in another jurisdiction where there's no reach in termsof the law and no willingness to investigate. Crypto gains madein some foreign jurisdictions are also relatively untouchable.
Allison Nathan: Have illicit actors using cryptocurrencies
gotten smarter, and how do you keep up?
Michael Gronager: Criminal actors are always looking for areasthat offer the least friction and the best opportunities forobfuscation. In the early days of cryptocurrencies, criminal
activity was predominately tied to smaller transactions involving
relatively normal people buying drugs online. But there's now agreater concentration of illicit activity tied to larger transactions.
As the size of transactions has increased, so too has the desireof criminals to feel safe in their transactions, which has led togreater guidance online about how to try and avoid being
tracked.
But the danger of using the blockchain for anything criminal isthat transaction records are stored forever. While anobfuscation scheme may work well today, it's always possiblethat technology will eventually make it trivial to investigate. And
that's what we've seen consistently over time; anything that
seemed like a really good obfuscation scheme yesterday hasoften vanished completely after a year or two and become
simple to investigate as we study the activity and figure out
how it works. At some point, we understand it well enough tobe able to assist the public sector in keeping citizens safe.

33

Issue 98

Bitcoin: beyond the basics
El

Step 1: Joining the Network and Buying Bitcoin
What do public and private keys actually look like?
• Bitcoin is a peer-to-peer electronic payment system thattransfers value between digital wallets. Wallets don’t store
currency, but rather interact with the blockchain by generating
the necessary information to receive and send money via
blockchain transactions.
• Wallets are a combination of a public key and a private key,and based on these keys, an alphanumeric identifier called apublic address is generated. Similar to an email address, thepublic address specifies the location to which coins can besent to the blockchain, and is shared among users. The private
key is used to access funds, and like a password, should not
be shared with anyone.
• Security issues present important risks for bitcoin users—
bitcoin is a bearer instrument, and knowing the private key to awallet would effectively put the user in possession of all
bitcoin directed towards that address. The best security
practice for crypto custody is to keep everything in cold
storage—offline—until you need to make a transaction, movethe wallet to hot storage—online—for the transaction, andthen move the wallet back into cold storage. Today, a numberof solutions exist to move wallets in and out of cold storage.

Cryptographic keys—which underpin BTC wallets—are strings of
numbers and letters:
Public key: Account number, similar toan e-mail address.
0450863aD64A87ae8A2fE83c1aF1a8403cB53f53e486D8511
DaD8A04887e5B23522cD470243453a299fa9E77237716103A
bc11A1dF38855eD6F2eE187E9c581bA6

Address: Shortened version of the public key,unique to each transaction.
1FfGkGsfn3DoDzwJTDmizXVVGBQKbVSwuo

Private key: Password granting access toa wallet’s funds
Kx3uWwctbQRj3dDhMynqamfLApV6wiX7JUY7cgN1YQgijhRY7PQe

What does a typical wallet look like?
Wallets contain digital records of past transactions, which are used to
calculate a total balance.
Example: Web/Mobile Wallet.0061BTC• The most popular way to obtain Bitcoin is through an
exchange. Currently, the most commonly used type of
exchange is not decentralized, and users need to provide
personal identification documents per Know Your Customer(KYC) and Anti-Money Laundering (AML) regulations. Bitcoin
ATMs and P2P exchanges are alternative ways of obtaining
bitcoin.

$300

Send BTC

Request BTC
Transaction History

Received Bitcoin (4/23/2021)

0.002BTC (+$100)

Sent Bitcoin (4/23/2021)-0.004BTC (-$200)

Purchased Bitcoin (4/23/2021)

0.0081BTC (+$400)

Step 2: Transacting in Bitcoin• Bitcoin can be transferred between wallets in exchange forother currencies or goods/services. There are three key
variables in a bitcoin transaction: an amount, an input—theaddress from which the bitcoin is sent—and an output—theaddress that receives the funds. To make a transaction, users
need to enter their private key, the amount of bitcoins theywant to send, and the output address. A digital signature isthen generated from the private key, and the transaction isannounced to the network.
• The transaction is included in a block, which is attached to theprevious block to be added to the network’s public ledger, theblockchain. The blockchain does not track account balances.
Rather, it keeps a record of where the bitcoin comes from andwhich address it is sent to. Therefore, the transaction input
must match a past transaction, not the value being transferred.
• If a user makes a transaction worth less than the total amountof bitcoin they have, change is returned to the user. For
example, assume User A has a total balance of 10BTC,
received through two previous transactions of 6BTC and 4BTC.
User A wants to send 2BTC to User B. To do so, User A sends
4BTC to User B and sends the change back to himself. Thischange is less any transaction fees that User A incurs, which
are based on the size of the transaction (bytes). And thechange does not go back to the original output—it will go to a
new address under the user’s control.
• The transaction is not immediately processed. Instead, it
enters a pool of pending transactions and goes through theverification process (see Step 3: Verifying Bitcoin Transactions).

Goldman Sachs Global Investment Research

How are bitcoin transactions recorded?
Example: User A Sends 2BTC to User B
SenderAddress

Input (BTC)

User A

14Q7x8pWz

4.0

ReceiverAddress

Output (BTC)

User B

12rgbuMEv

2.0

User A

1EmDcxbnu

2.0-fees

ReceiverAddressFee (BTC)

Value sent must havebeen received in apast transaction—
think of it like using a
gift card with 4BTC.

The transaction’s“change” goes back toUser A; the address isdifferent, but the funds
will likely return to thesame wallet.

Every transaction in the blockchain is tied to a unique identifier
known as a transaction hash, which is a 64-character random
string of letters and numbers. Transactions can be tracked using
this identifier.
Example ID:

0818d8a2f694077370cedf571c246d9cb3c4bd49
0bec66960df684fae618c68

34

Issue 98
El

Step 3: Verifying Bitcoin Transactions
How do miners add blocks to the blockchain?
• In order for transactions to be recorded on the blockchain, theymust be verified by miners. Miners can be individuals or poolsof people. Most mining today is conducted by pools of miners.

New transactions are verified and pooled.
Transaction• First, miners identify whether a transaction is valid. Bitcoin
senders must have both the proper authority to send funds
and the necessary funds to back the transaction. Once thetransaction is validated, it is packaged into a block with othervalid transactions. Blocks have a maximum size of 1MB.

Transaction
Transaction

New transactions are grouped into a blockwith some data from past transactions.

• Miners then compete against each other to be the first to add
their block to the blockchain by solving a complex
mathematical puzzle and including the answer in the block. The
puzzle is to find a number that, when combined with the datain the block and passed through a hash function—whichconverts input data of any size into output data of a fixed
length—produces a result within a certain range. The result iscalled a nonce, which is an integer between 0 and
4,294,967,296.

NewTransactions
Past
Transactions

Miners solve a complex mathematical puzzle to identify
the nonce that produces an output within a range
determined by the bitcoin software.

• Miners find the nonce effectively by guessing what it is. The
more computing power a miner has, the more guessing
calculations he can perform. The hash function is applied to the
combination of a guessed number and the data in the block,and the resulting hash will begin with a certain number ofzeros—which determines the difficulty of the calculation. Thisdifficulty is frequently adjusted to ensure that it takes anaverage of 10 minutes to process a block.

New
Transactions
Past
Transactions?

?

• The first miner to get a resulting hash within the proper range
alerts the network, and all other miners stop working on theblock at that point. As a reward, the winning miner getscompensated with some new bitcoin. The amount of the
reward decreases over time, halving around every four years.

?

The correct nonce produces a hash withthe right number of leading zeros. The
required number of zeros is the difficultyof the calculation.

• Importantly, the hashing process puts a timestamp on alltransactions contained within each block. It also links the datafrom new transactions to information from past blocks.
Therefore, transactions can’t be undone or tampered with,because that would require redoing all the blocks that cameafter the original block.

Example: 00000000000000000018d08c4a80480865caa0a8269a967bf59df57d5d5e73b3

The first block containing a proper hashbecomes the newest block on the blockchain.

Step 4: Creating New Bitcoins• In addition to receiving rewards for verifying transactions andmaintaining the blockchain, miners also receive transaction
fees. These are payments by bitcoin users to ensure that
their transactions go through quickly given the limited
throughput of the bitcoin network (approx. 4.6 transactions
per second). Therefore, increases in transaction volume have
led to an increase in transaction fees paid to miners.
• Bitcoin’s founder set a limit for the maximum supply of
bitcoin that will ever be in circulation at 21mn. Today, there
are approx. 18.7mn in circulation, although some coins havelikely been lost. Given the current halving rate, the final
bitcoin is expected to be mined in 2140.
• While its technically feasible to change the 21mn limit if thecommunity chooses to do so, the bitcoin community has longstood in favor of the limit.
• Once the 21mn limit is reached, transaction costs may needto significantly increase to incentivize miners to continue
maintaining the blockchain, since there will not be any more
rewards received from mining a new block.

What’s keeping the network running?

18
15

Transaction Volume, adj. (lhs, $bn, 7dma)*
Avg. Transaction Fee (rhs, $, 7dma)

60
50

12

40

9

30

6

20

3

10

0
Jan-18 Jul-18

Jan-19 Jul-19

Jan-20Jul-20Jan-210*Adjusted transaction volume is calculated by Coinmetrics as the dollar value of thesum of all native units transferred that day, removing noise and certain artifacts.
Source: Coinmetrics, Goldman Sachs GIR.

Source: Princeton University, Cambridge University, Blockchain Council, Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, Blockchain.com,
CoinDesk, Coinmetrics, various news sources, Goldman Sachs GIR.
Goldman Sachs Global Investment Research35Issue 98

Top of Mind archive: click to access

El

Issue 97
Reflation Risk
April 1, 2021

Issue 82
Currency Wars
September 12, 2019

Issue 96
The Short and Long of Recent Volatility
February 25, 2021

Issue 81
Central Bank Independence
August 8, 2019

Issue 95
The IPO SPAC-tacle
January 28, 2021

Issue 80
Dissecting the Market Disconnect
July 11, 2019

Special Issue
2020 Update, and a Peek at 2021
December 17, 2020

Issue 79
Trade Wars 3.0
June 6, 2019

Issue 94
What's In Store For the Dollar
October 29, 2020

Issue 78
EU Elections: What’s at Stake?
May 9, 2019

Issue 93
Beyond 2020: Post-Election Policies
October 1, 2020

Issue 77
Buyback Realities
April 11, 2019

Issue 92
COVID-19: Where We Go From Here
August 13, 2020

Issue 76
The Fed’s Dovish Pivot
March 5, 2019

Issue 91
Investing in Racial Economic Equality
July 16, 2020

Issue 75
Where Are We in the Market Cycle?
February 4, 2019

Issue 90
Daunting Debt Dynamics
May 28, 2020

Issue 74
What’s Next for China?
December 7, 2018

Issue 89
Reopening the Economy
April 28, 2020

Issue 73
Making Sense of Midterms
October 29, 2018

Issue 88
Oil’s Seismic ShockMarch 31, 2020

Issue 72
Recession Risk
October 16, 2018

Issue 87
Roaring into Recession
March 24, 2020

Issue 71
Fiscal Folly
September 13, 2018

Issue 862020’s Black swan: COVID-19
February 28, 2020

Issue 70
Deal or No Deal: Brexit and the Future of Europe
August 13, 2018

Issue 85
Investing in Climate Change
January 30, 2020

Issue 69
Emerging Markets: Invest or Avoid?
July 10, 2018

Special Issue
2019 Update, and a Peek at 2020
December 17, 2019

Issue 68
Liquidity, Volatility, Fragility
June 12, 2018

Issue 84
Fiscal Focus
November 26, 2019

Issue 67
Regulating Big Tech
April 26, 2018

Issue 83
Growth and Geopolitical Risk
October 10, 2019

Issue 66
Trade Wars 2.0
March 28, 2018

Source of photos: www.istockphoto.com, www.shutterstock.com, US Department of State/Wikimedia Commons/Public Domain.

Goldman Sachs Global Investment Research36Issue 98
El

開示事項
レギュレーションAC
私達、アリソン・ネーザン、ジェニー・グリムバーグ、ガベ・リプトン ガルブレイス、ジェフリー・カリー、クリスチャン・ミュラーグラスマ
ン、ザック・パンドル、ミクハイル・スポロジスはここに本リポートで表明された全ての見解が、私個人の見解を正確に反映したものであり、当社の業務や顧客との関係への配慮により影響を受けていないことを証明します。
特に断りのない限り、本リポートの表紙に掲載されている個人はゴールドマン・サックスのグローバル投資調査部のアナリストです。

開示事項
規制に基づく開示事項
米国法ならびに米国の規制に基づく開示事項
本資料に記載された企業に要求される以下の開示事項に関しては、上記の各会社に関する規制に基づく開示事項をご参照ください：主幹事会社または 共同主幹事会社の役割；1％またはその他の持分；特定の業務に係る報酬の受領；顧客関係の種類；過去の証券公募における主幹事会社または共同主 幹事
会社の役割；役員の兼務；株式については、マーケット･メーカーおよび/またはスペシャリストの任務。ゴールドマン・サックスは本資料に記載 された発行体の債券(あるいは関連する派生商品)の自己勘定売買を行います、あるいは行う場合があります。
追加の開示事項： 証券の保有ならびに実質的な利害の対立：ゴールドマン・サックスの方針では、アナリスト、アナリストの下で業務を行うプロフェッ
ショナル、およびその同居家族が、アナリストが調査対象としている企業の証券を保有することを禁止しています。 アナリストの報酬：アナリストの報
酬は、投資銀行部門の収益を含むゴールドマン・サックス全体の収益も考慮した上で決定されています。 アナリストによる役員の兼務：ゴールドマン・
サックスの方針では通常、アナリスト、アナリストの下で業務を行う者、またはその同居家族が、アナリストが調査対象としている企業 の役員、取締役
または顧問を兼務することを禁止しています。 米国以外のアナリスト：米国以外のアナリストは必ずしもゴールドマン・サックス・アンド・カンパニーの外務員ではなく、したがって調査対象企業とのコミュニケーション、公の場への登場、保有証券の売買を規制するFINRAの規則2241あるいは規則2242の適用対象とならない場合があります。

米国以外の管轄地域の法律や規制に基づく追加の開示事項
以下の開示事項は、米国法ならびに規制に基づきすでに記載された項目以外に、各管轄地域で開示が求められているものです。 オーストラリア：ゴー
ルドマン･サックス･オーストラリアPty Ltdおよびその関連会社はBanking Act 1959 (Cth)で定義されるオーストラリアの公認預金受入機関ではなく、オーストラリアにおいて銀行サービスを提供することも銀行業務を営むこともありません。本資料および本資料の入手や利用は、ゴールドマン･ サックスが別段に合意した場合を除き、Australian Corporations Actで定義されている”wholesale clients”のみを対象としています。調査資料の作成にあたり、ゴールドマン･サックス･オーストラリア投資調査部の社員が、調査資料で言及する企業およびその他の事業体が主催する会社訪問や工 場見学、その他会合に出席することがあります。ゴールドマン･サックス･オーストラリアがかかる訪問や会合に関する状況に照らして適切かつ妥当と 判断した場合には、その訪問や会合の費用の一部または全額を当該発行体が負担することがあります。本資料において金融商品に関してなんらかの意 見が含まれる場合は一般的な見解であり、個々のお客様の投資目的、財務状況、もしくは必要性を考慮することなくゴールドマン･サックスが作成し たものです。お客様
は、これらの意見に基づき投資行動をとる場合、当該意見が自身の投資目的、財務状況、必要性に鑑み適切であるかを事前にご考 慮ください。 オース
トラリアおよびニュージーランドのゴールドマン・サックスにおける利益相反に関する開示事項並びにゴールドマン･サックスにおけるオーストラリアセ
ルサイドリサーチの独立性に関するポリシーはhttps://www.goldmansachs.com/disclosures/australia-new-zealand/index.html をご覧ください。 ブ
ラジル：ブラジル証券取引委員会(CVM) Instruction 598に関係する開示情報については、https://www.gs.com/worldwide/brazil/area/gir/index.html
をご覧ください。CVM Instruction598第20項が適用される場合、本文の最後に特に明記のない限り、本資料の初めに記載された最初のアナリストが、同項が定義する、本資料の内容に 主たる責任を負う、ブラジルで資格登録されたアナリストとなります。 カナダ：ゴールドマン･サックス･カナダ･インク
はゴールドマン･サックス･グループ･インクの関連会社であり、したがってゴールドマン･サックス(上記定義)に関する会社に関する規制に基づく開示の対象に含まれます。ゴール ドマン･サックス･カナダ･インクは、本資料を顧客に広範に配布する場合、その範囲において本資料を承認するものとし、またその内容に責任を負う ことに同意しているものとします。 香港：本資料に記載された、当社アナリストが調査対象としている企業の有価証券に関し、さらに詳しい情報がご入用の際には、ゴールドマン･サックス(アジア)L.L.C.にお問い合わせください。 インド：本資料に記載された企業に関しさらに詳しい情報がご入用の際には、ゴールドマン･サックス(インド)セキュリティーズ･プライベート･リミテッド、SEBIにおけるリサーチアナリスト登録
番号INH000001493、951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India、法人登記番号U74140MH2006FTC160634、
電話番号+91 22 6616 9000、Fax +91 22 6616 9001までお問い合わせください。ゴールドマン･サックスは本資料に記載された企業の(Indian
Securities Contracts (Regulation) Act 1956第2項(h)で定義される)証券を1%以上実質保有している場合があります。 日本：金融商品取引法第37条に定める事項の表示をご参照ください。 韓国：本資料及びそのアクセスは、ゴールドマン・サックスとの別段の同意がない限り、韓国金融投資サービ
スおよび資本市場法の「プロフェッショナル投資家」に向けたものです。 本資料に記載された企業に関しさらに詳しい情報がご入用の際には、ゴールド
マン･サックス(アジア)L.L.C.ソウル支店までお問い合わせください。 ニュージーランド：ゴールドマン･サックス･ニュージーランド･リミテッドおよびその関連会社は(Reserve Bank of New Zealand Act 1989で定義される)｢登録銀行｣でも｢預金受入機関｣でもありません。本資料および本資料の入手や利用は、ゴールドマン･サックスが別段に合意した場合を除き、Financial Advisors Act 2008で定義されている”wholesale clients”のみを対象としています。 オーストラリアおよびニュージーランドのゴールドマン・サックスにおける利益相反に関する開示事項はhttps://www.goldmansachs.com/disclosures/australia-new-zealand/index.html をご覧ください。 ロシア：ロシア連邦で配布される調査リポート
は、ロシア法で定義される広告ではなく、商品の宣伝を主目的としない情報・分析に該当するものであり、ロシアの資産評価に関する法の意義の範囲 内
における評価を提供するものではありません。 調査リポートは、ロシア法ならびに規制に基づく個人向けの推奨を構成するものではありません。また、
特定のお客様に向けたものではなく、お客様の財務状況、投資プロファイルまたはリスクプロファイルを分析することなく作成したものです。 本資料に基づくお客様やその他の投資行動について、ゴールドマン･サックスは一切の責任を負いかねます。 シンガポール：本資料に関するあらゆる事柄については、シンガポール金融管理局の規制を受け、本資料の法的責任を負っているゴールドマン・サックス(シンガポール)Pte.(Company Number:
198602165W)までお問合せください。 台湾：本資料は情報提供のみを目的としたものであり、当社の承諾なしに転載することはできません。投資に際しましては、各自の投資リスクを慎重にご検討ください。投資の結果につきましては個々の投資家が責任を負うものとします。 英国：英国金融行動監視機構の規則において個人投資家の定義に該当するお客様は、本資料を本資料で取り上げた、当社アナリストが調査対象としている企業に 関する過去のゴールドマン･サックス･リポートと関連してお読みいただき、ゴールドマン･サックス･インターナショナルから送られたリスク警告を参 照して下さい。これらのリスク警告の写しや本資料で使用した金融用語の用語解説をご希望の方は、ゴールドマン･サックス･インターナショナルまで お問い合わせ下さい。
欧州連合ならびに英国：投資推奨または投資戦略を推奨、提案するその他の情報の客観的な提示、および個人の利益の開示または利益相反の表明の技 術
的な手続きに関する規制技術基準についての欧州議会および理事会規則(EU) No 596/2014を補足する欧州委員会委任規則(EU)(2016/958)の第6条2項(英国の欧州連合および欧州経済領域からの離脱後に英国の国内法や規制に組み込まれる委任規則も含む)に関連する開示情報は、欧州での投資調査に 関する利益相反管理方針を記載したhttps://www.gs.com/disclosures/europeanpolicy.htmlでご覧いただけます。

グローバル調査資料：配布機関
ゴールドマン･サックスのグローバル･インベストメント･リサーチ部門は、全世界でゴールドマン･サックスのお客様向けに調査資料の発行と配布を行 っています。世界各地のゴールドマン･サックスのオフィスに勤務するアナリストは、業界および企業、マクロ経済、為替、市況商品、ポートフォリオ戦略
Goldman Sachs Global Investment Research37Issue 98
Elに関する調査資料を発行しています。本資料の配布については、オーストラリアではゴールドマン･サックス･オーストラリアPtyリミテッド(ABN 21 006
797 897)が、ブラジルではゴールドマン･サックス･ドゥ･ブラジル･コレトラ･デ･ティツロス･エ･ヴァロレス･モビリアリオスS.A.が、オンブスマン･ゴー
ルドマン･サックス･ブラジル： 0800 727 5764 および/または ouvidoriagoldmansachs@gs.com (平日の午前9時から午後6時にお問い合わせください)。
Ouvidoria Goldman Sachs Brasil: 0800 727 5764 e/ou ouvidoriagoldmansachs@gs.com. Horário de funcionamento: segunda-feira à sexta-feira(exceto feriados), das 9h às 18h、カナダではゴールドマン･サックス･カナダ･インクまたはゴールドマン･サックス･アンド･カンパニーが、香港ではゴールドマン･サックス(アジア)LLC が、インドではゴールドマン･サックス(インド)セキュリティーズ･プライベート･リミテッドが、日本ではゴールド
マン･サックス証券株式会社が、韓国ではゴールドマン･サックス(アジア)LLC ソウル支社が、ニュージーランドではゴールドマン･サックス･ニュージー
ランド･リミテッドが、ロシアではOOOゴールドマン･サックスが、シンガポールではゴールドマン･サックス(シンガポール)Pte(Company Number:
198602165W)が、米国ではゴールドマン･サックス･アンド･カンパニーが、これを行います。ゴールドマン･サックス･インターナショナルは英国および欧州連合内での本資料の配布を承認しています。
欧州委員会：英国プルーデンス規制機構により認可され、英国金融行動監視機構ならびに英国プルーデンス規制機構の監督を受けるゴールドマン･サ ッ
クス･インターナショナルは、欧州連合域内および英国国内における本資料の配布を承認しております。
英国が欧州連合ならびに欧州経済領域を離脱した日(｢離脱日｣)からは、配布機関に関する以下の情報が適用されます。
英国プルーデンス規制機構(｢PRA｣)により認可され、英国金融行動監視機構(｢FCA｣)ならびにPRAの監督を受けるゴールドマン･サックス･インターナシ ョ
ナル(｢GSI｣)は、英国国内における本資料の配布を承認しております。
欧州経済領域：PRAにより認可され、FCAならびにPRAの監督を受けるGSIは欧州経済領域内の以下の管轄地域で調査資料を配布します：ルクセンブルク 大公国、イタリア、ベルギー王国、デンマーク王国、ノルウェー王国、フィンランド共和国、アイルランド共和国；フランスでは、離脱日よりフラン ス健
全性監督破綻処理機構(｢ACPR｣)が認可し、ACPRとフランス金融市場庁(｢AMF｣)が監督することになるGS -Succursale de Paris(パリ支店)が調査資料を配布します；スペイン王国では、スペイン証券取引委員会に認可されたGSI - Sucursal en España(マドリード支店)が調査資料を配布します； GSI Sweden Bankfilial(ストックホルム支店)はSwedish Securities and Market Act (Sw. lag (2007:528) om värdepappersmarknaden)第4章4項に基づき
SFSAより｢第三国支店｣として認可されており、スウェーデン王国内で調査資料の配布を行います。ドイツで法人化された金融機関であり、単一 監督メカ
ニズム内で欧州中央銀行の直接のプルーデンシャル規制の対象となり、その他の点ではドイツ連邦金融監督庁(Bundesanstalt fürFinanzdienstleistungsaufsicht、BaFin)およびドイツ連邦銀行の監督を受けるゴールドマン･サックス･バンク･ヨーロッパSE (｢GSBE｣)が、ドイツ連邦
共和国内および欧州経済領域内でGSIが認可されていない管轄地域で調査資料を配布します；また、デンマーク王国では、デンマーク金融監督庁の 監督を受けるGSBEコペンハーゲン支店(filial af GSBE、Tyksland)が調査資料を配布します；スペイン王国では、(限られた範囲で)スペイン銀行の国内での監督対象となるGSBE - Sucursal en España(マドリード支店)が調査資料を配布します；イタリアでは、関係する適切な範囲内でイタリア銀行(Banca
d’Italia)およびイタリア証券取引委員会(Commissione Nazionale per le Società e la Borsa “Consob”)の国内での監督対象となるGSBE- Succursale Italia(ミラノ支店)が調査資料を配布します；フランスでは、AMFとACPRの監督対象となるGSBE - Succursale de Paris(パリ支店)が調査
資料を配布します；スウェーデン王国では、限られた範囲でSwedish Financial Supervisory Authority (Finansinpektionen)の国内での監督対象となるGSBE - Sweden Bankfilial(ストックホルム支店)が調査資料を配布します。

一般的な開示事項
本資料はお客様への情報提供のみを目的としています。ゴールドマン･サックスに関する開示事項を除き、本資料は信頼できると思われる現在の公開 情報に基づいて作成されていますが、当社はその正確性、完全性に関する責任を負いません。本資料に記載された情報、意見、推定、予想等は全て本 資料
発行時点のものであり、事前の通知なしに変更される場合があります。当社は本資料中の情報を合理的な範囲で更新するようにしていますが、法 令上の理由などにより、これができない場合があります。定期的に発行される一部の業界リポートを除いて、大部分のリポートはアナリストの判断に より変則的な間隔を置いて発行されます。
ゴールドマン･サックスは、投資銀行業務、投資顧問業務および証券業務を全世界で提供する総合金融会社です。当社はグローバル･インベストメン ト･リサーチ部門が調査対象としている企業の大部分と投資銀行その他の業務上の関係を持っています。米国のブローカー･ディーラーであるゴールド マン･
サックス･アンド･カンパニーは証券投資家保護公社(SIPC)(https://www.sipc.org)に加盟しています。
当社のセールス担当者、トレーダーその他の従業員は、口頭または書面で、本資料で述べられた意見と異なる内容の市場に関するコメントや投資戦略 を、当社の顧客およびプリンシパル取引部門に提供することがあります。当社の資産運用部門、プリンシパル取引部門、投資部門は、本資料で示され た投資見解や意見と整合しない投資決定を下すことがあります。
当社および当社の関連会社、役員、社員は、法令あるいはゴールドマン･サックスのポリシーで禁じられていない限り、本資料に記載された証券また は派生商品(もしあれば)の買い持ちや売り持ち、および売買を時として行うことがあります。
当社主催のコンファレンスで、当社の他の部門の従業員を含む、サードパーティのスピーカーが示す見解は、必ずしもグローバル投資調査部の見解を 反映したものではなく、また当社の公式見解でもありません。
ここで述べるサードパーティは、セールス担当者、トレーダー、その他プロフェッショナル、およびその同居家族を含み、本資料で言及された金融商 品について、本資料を執筆したアナリストの見解と相反するポジションをとることがあります。
本資料は市場や業種、セクターを越えた投資テーマに重点を置いています。本資料は当社が言及する業種またはセクター内の個別企業の見通しやパフ ォーマンスを識別しようとするものではなく、個別企業の分析を提供しようとするものでもありません。
本資料における、ある業種またはセクター内の一つもしくは複数のエクイティまたはクレジット証券に関する取引推奨は、いずれも本資料で論じた投 資
テーマを反映するものであり、テーマから切り離して当該証券を推奨するものではありません。
本資料は売却・購入が違法となるような法域での有価証券の売却もしくは購入を勧めるものではありません。本資料は個人向けの推奨を構成するもの ではなく、また個々のお客様の特定の投資目的、財務状況、もしくは要望を考慮したものでもありません。お客様は、本資料のいかなる意見または推 奨に基づき投資行動をとる場合でも、その前にそれらがお客様の特定の状況に当てはまるか否かを考慮に入れるべきであり、必要とあれば税務アドバ イスも含めて専門家に助言を求めて下さい。本資料に記載されている投資対象の価格と価値、およびそれらがもたらす収益は変動することがありま す。過去の実績は将来のパフォーマンスを約束するものではありません。将来の収益は保証されているわけではなく、投資元本割れが生じることはあ り得ます。
為替変動は特定の投資の価格と価値、およびそれがもたらす収益にマイナスの影響を与えることがあります。
先物、オプション、およびその他派生商品に関係する取引は大きなリスクを生むことがあり、すべての投資家に適切な取引ではありません。投資の際 にはゴールドマン･サックスの担当者もしくはウェブサイトhttps://www.theocc.com/about/publications/character-risks.jspおよびhttps://www.fiadocumentation.org/fia/regulatory-disclosures_1/fia−uniform−futures−and−options−on−futures−risk−disclosures−booklet−pdf−
version−2018を通じて入手可能なオプションおよび先物に関する最新の開示資料をよくお読みください。オプションの買いと売りを組み合わせるスプ レッドなどのオプション戦略では取引コストがかなり高くなることがあります。関連資料をご希望の方はお申しつけください。
グローバル投資調査部が提供する異なるレベルのサービス：当社グローバル投資調査部が提供するサービスのレベルならびに種類は、コミュニケーシ ョ
ンを受け取る頻度や手段に関するお客様のご要望、お客様のリスク特性や投資の重点分野ならびに大局的な投資観(市場全体、セクター固有、長期、短期等)、当社との顧客関係全体の規模や範囲、法律や規制による制約といった様々な要因により、当社の社内顧客および社外の他の顧客に提供 されるサービスと異なる場合があります。一つの例として、特定の有価証券に関する調査資料の発行時に通知を依頼されるお客様もいれば、当社顧客 向け内部ウェ
ブサイトで入手可能なアナリストのファンダメンタル分析の基礎となる特定のデータの、データフィードその他手段による電子配信を依 頼されるお客様もいます。アナリストの根本的な調査見解の変更(株式の場合はレーティングや目標株価、業績予想の大幅な変更など)については、かかる情報を含む調査リポートが作成され、当社顧客向け内部ウェブサイトへの掲載という電子的発行または必要に応じてその他手段により、当該リポ ートがそれを受け取る資格のあるすべての顧客に広範に配布されるまでは、いかなる顧客にも伝達されることはありません。
すべての調査資料は電子的発行手段により当社の顧客向け内部ウェブサイトですべての顧客に一斉に配布され、閲覧可能となります。調査資料のすべ てGoldman Sachs Global Investment Research38Issue 98
Elの内容が当社顧客向けに再配布されたり、第三者のアグリゲーターに提供されたりするわけではなく、ゴールドマン・サックスは第三者のアグリゲ ーターによる当社の調査資料の再配布に責任を負っているわけでもありません。一つ以上の有価証券や市場、資産クラス(関連サービス含む)に関して ご利用可能
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金融商品取引法第37 条に定める事項の表示
本資料とともに、金融商品取引をご案内させていただく場合は、各金融商品取引の資料をよくお読みください。金融商品取引を行われる場合は、各商 品等に所定の手数料等(たとえば、株式のお取引の場合には、約定代金に対し、事前にお客様と合意した手数料率の委託手数料および消費税、投資信 託のお取引の場合には、銘柄ごとに設定された販売手数料および信託報酬等の諸経費、等)をご負担いただく場合があります。また、すべての金融商 品には、関連する特殊リスクがあり、国内外の政治・経済・金融情勢、為替相場、株式相場、商品相場、金利水準等の市場情勢、発行体等の信用力、 その他指標とされた原資産の変動により、多額の損失または支払い義務が生じるおそれがあります。さらに、デリバティブのお取引の場合には、弊社 との合意により具体的な額が定まる保証金等をお客様に差し入れていただくこと、加えて、追加保証金等を差し入れていただく可能性もあり、こうし た取引についてはお取引の額が保証金等の額を上回る可能性があります(お取引の額の保証金等の額に対する比率は、現時点では具体的条件が定まっ ていないため算出できません)。また、上記の指標とされた原資産の変動により、保証金等の額を上回る損失または支払い義務が生じるおそれがあり ます。さらに、取引の種類によっては、金融商品取引法施行令第16条第1項第6号が定める売付けの価格と買付けの価格に相当するものに差がある場合 があります。な
お、商品毎に手数料等およびリスクは異なりますので、当該商品等の契約締結前交付書面や目論見書またはお客様向け資料をよくお読 みください。
権利行使期間がある場合は権利を行使できる期間に制限がありますので留意が必要です。
期限前解約条項、自動消滅条項等の早期終了条項が付されている場合は、予定された終了日の前に取引が終了する可能性があります。
商号等：ゴールドマン･サックス証券株式会社 金融商品取引業者 関東財務局長(金商)第69号
加入協会：日本証券業協会、一般社団法人金融先物取引業協会、一般社団法人第二種金融商品取引業協会© 2021 ゴールドマン・サックス
本書の一部または全部を、ゴールドマン･サックス･グループ･インクの事前の書面による承諾がない限り、(i)複写、写真複写、あるいはその他のいか なる手段において複製すること、または(ii)再配布することを禁じます。

Goldman Sachs Global Investment Research

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