Mainstream Adoption Won’t Raise Bitcoin Price


Goldman Sachs’ words have been interpreted as a sign that the cryptocurrency craze may be coming to an end. The analysts of this global banking powerhouse say they don’t see mainstream adoption going to boost the crypto industry anytime soon. Unfortunately, that means bad news for those who bought bitcoin or other crypto assets on hope chests, full-on optimism about its value increasing exponentially over time.

Cryptocurrencies are becoming more and more popular as the adoption rate for Bitcoin increases. The strategists tell Bloomberg that correlation has begun to show up with other macro assets like crude oil, technology stocks and the US dollar — all of which have also seen significant growth of late.

Various asset classes are often seen as a way to diversify your investments. However, according to analysts, this may not be true for crypto assets due to their high correlation to traditional markets. Making them particularly susceptible during economic downturns or periods when investors panic on exchanges such as Binance lose half its value within a few months.

“Mainstream adoption can be a double-edged sword. While it may increase valuations, it is also likely to increase correlations with other financial market variables, diminishing the diversification benefit of holding the asset class.”

The Decline in the Crypto Industry

Cryptocurrencies have been steadily declining since November. The market cap of all cryptocurrencies has fallen from $2.8 trillion at its peak in November to just $1.68 trillion now as I write these words. Analysts point out how correlations to stocks or USD strength often affect prices, but what about broader? Is there anything else going through these declining markets besides traditional economic factors like interest rates and corporate earnings?

Related literature | Which cryptocurrencies suffered the worst collapse since all-time highs?

Crypto Market Capital Disintegrates to $1.68 Trillion. Source: Tradingview.com

Which could cause such dramatic price swings in various crypto currencies, both rising and falling. However, the blame isn’t just on one side; many factors drive prices up or down. Those include government regulations abroad where most blockchain technologies operate (such as China and Russia).

Whether blockchain technology can escape macroeconomic influence and monetary policy is still an open question.

Goldman says;

“Over time, the further development of blockchain technology, including applications in the metaverse, could provide a secular tailwind for valuations for certain digital assets. But these assets will not be immune to macroeconomic forces, including monetary tightening by the central bank.”

Featured image from Pixabay, chart from TradingView.com

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