As the global liquidity crisis recedes, sentiment in the cryptocurrency market is heating up. Yet, Goldman Sachs has poured cold water on this optimism.
In a recent client meeting, the wealth management division of Goldman Sachs expressed a dismissive stance toward cryptocurrencies like Bitcoin. They stated, “Cryptocurrencies including Bitcoin are not an asset class. They generate no cash flow, nor do they serve as an effective inflation hedge. Securities whose value depends primarily on whether someone else is willing to pay a higher price are not suitable investments for our clients. While the high volatility may appeal to hedge funds, it does not constitute a viable investment thesis.”
However, many outside the firm are unconvinced. Independent researcher Kevin Rooke tweeted, “Wall Street wants Bitcoin, and they don’t care what Goldman Sachs says.” Ryan Selkis, CEO of crypto research firm Messari, even used Goldman’s old nickname—“vampire squid”—to mock the bank’s position.
While Goldman’s wealth managers remain bearish, advising high-net-worth clients to stick with traditional assets like bonds, data suggests a different trend. More institutional and individual investors are entering the Bitcoin ecosystem, and Goldman’s skepticism appears increasingly out of step.
Exchange Withdrawals Hit Record Highs
On May 26, Glassnode reported a significant outflow of Bitcoin from major exchanges like Bitfinex, Huobi, BitMEX, and Binance. Since the March 12 “Black Thursday” crash, over 310,000 BTC have been withdrawn from these platforms. Bitfinex saw the largest outflow at 126,845 BTC, followed by Huobi with 95,496 BTC and BitMEX with 95,438 BTC.
This decline in exchange balances isn’t temporary. Data from research firm Arcane Research shows that the total Bitcoin held in major exchange wallets has continued to drop, nearing a one-year low.
Industry experts attribute this “withdrawal wave” to two main factors. First, users are increasingly concerned about exchange security and prefer to hold their assets in private wallets. During the March 12 crash, BitMEX went offline for about 25 minutes, and Huobi experienced network congestion, undermining trust. Second, many investors are shifting their strategy—they now view Bitcoin as a long-term store of value rather than a short-term trading asset.
Glassnode’s data supports this view. Since the March downturn, the number of “Bitcoin whales” (addresses holding at least 1,000 BTC) has surged, reaching a two-year high.
Interestingly, despite expectations of a post-halving price surge, exchange net outflows dropped significantly just before and after the May 11 halving event. Yet, the overall trend of withdrawals has persisted.
For the broader market, declining exchange balances are often interpreted as a bullish signal, indicating reduced selling pressure and increased long-term holding.
Who’s Buying All This Bitcoin?
“Bitcoin will replace gold as the primary store of value in investment portfolios,” proclaims Barry Silbert, founder of Grayscale Investments. His firm, the largest Bitcoin trust (GBTC) manager on Wall Street, has been the biggest buyer in the spot market this year. According to Grayscale’s latest Twitter update, the trust holds approximately 347,000 BTC, with assets under management totaling $3.3 billion.
Crypto researcher Kevin Rooke highlighted that since the halving, Grayscale’s Bitcoin Trust has acquired 18,910 BTC. During the same period, miners produced only 12,337 new BTC. This means Grayscale bought 150% of all newly mined Bitcoin.
Since 88% of GBTC investors are institutions, this aggressive accumulation signals that miner supply can’t keep up with institutional demand. For large investors, GBTC offers a compelling entry point.
Why is GBTC so popular? The trust was launched in 2013 and went public through a private placement exempt from SEC registration. In 2015, it received FINRA approval, becoming the first publicly traded Bitcoin investment vehicle.
GBTC operates by offering quarterly private placements to accredited investors and institutions, with a minimum investment of $50,000. Investors can contribute Bitcoin or cash. Because GBTC doesn’t support redemptions, shares must be locked up for six months before being sold on the secondary market. Retail investors can easily buy shares through any brokerage account.
GBTC lowers entry barriers and mitigates risks like exchange hacks or lost private keys. It also simplifies tax reporting—a significant advantage for U.S. investors navigating complex IRS guidelines.
In short, GBTC has democratized Bitcoin investment for mainstream and institutional audiences. While institutional inflows don’t guarantee price appreciation, they indicate growing legitimacy and adoption.
Beyond Grayscale, hedge funds, family offices, and high-net-worth individuals are also entering the crypto space, especially amid rising economic uncertainty.
Bitcoin and Gold: Rising Together in a Crisis?
Grayscale’s “DropGold” campaign, which encourages investors to swap gold for crypto, suggests that digital assets are now competing with traditional safe havens.
Throughout history, money has evolved from shells to precious metals to government-issued fiat currencies. In 1971, President Nixon ended the convertibility of the U.S. dollar into gold, effectively dismantling the Bretton Woods system and demonetizing gold. Yet gold remains a globally accepted hedge against financial instability, valued for its scarcity and durability.
In April, Bloomberg News published a report titled “Bitcoin Maturation Leap,” arguing that the COVID-19 pandemic has accelerated Bitcoin’s transition into “digital gold.” The report noted that unprecedented monetary stimulus by central banks worldwide has strengthened the correlation between Bitcoin and gold.
Despite initial sell-offs in March, both assets recovered quickly. Bitcoin held above its 2018 low, while the S&P 500 broke below its two-year support level. This resilience suggests that Bitcoin and gold are consolidating their bull markets, rebounding faster than equities.
Although many gold proponents remain skeptical, data shows a growing correlation between Bitcoin and gold. Bitcoin’s volatility has decreased while its price trend increasingly mirrors gold’s. This reinforces the argument that Bitcoin is evolving into a credible safe-haven asset.
Moreover, Bitcoin’s issuance rate is converging with gold’s. According to a joint report by Bitstamp and Messari, gold’s annual supply growth has remained steady at 1.8% since 2013. Bitcoin’s issuance rate, however, has dropped dramatically—from 32.7% after the 2012 halving to 7.0% after 2016, and now to 2.5% post-2020 halving. By 2021, it will match gold’s 1.8%.
Glassnode data further suggests Bitcoin may be scarcer than previously thought—7.78% of the supply (worth about $13 billion) hasn’t moved in over a decade.
Like gold, Bitcoin is increasingly recognized as a non-sovereign reserve asset. Even Paul Tudor Jones, the legendary macro hedge fund manager, has publicly endorsed Bitcoin as a modern inflation hedge, akin to gold in the 1970s.
Steady Progress After a Decade of Challenges
In 2008, when Microsoft was venturing into cloud computing, then-CEO Steve Ballmer declared, “For the cloud, we’re all in.” Today, a similar rallying cry is emerging for Bitcoin: “For Bitcoin, we’re all in.”
Born during the financial crisis, Bitcoin has been both celebrated and criticized. Many dismissed it as a speculative bubble or outright scam. Yet, a growing community of believers has patiently built the case for its value, attracting more users and institutional interest.
Twitter CEO Jack Dorsey is one prominent advocate. He regularly buys Bitcoin, promotes it publicly, and even has “Bitcoin” in his Twitter bio. He considers the Bitcoin whitepaper one of the most groundbreaking works in computer science over the past 30 years.
Data shows user adoption is accelerating. Glassnode reports that since Bitcoin’s 2018 price bottom, the number of addresses holding 0.1 to 1 BTC has increased by 10%.
Similarly, analytics platform Santiment notes a rise in wallets holding over 100 BTC. In just five days, these addresses accumulated over 12,000 BTC, worth $108 million.
These are encouraging signs. However, the cryptocurrency industry still requires time and patience to reach its full potential. Widespread understanding and adoption won’t happen overnight, but the trend is clear: more players are going “all in” on Bitcoin.
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Frequently Asked Questions
Why are institutions buying Bitcoin despite its volatility?
Institutions view Bitcoin as a long-term store of value and hedge against inflation. Products like Grayscale’s GBTC make it easier for them to gain exposure without directly holding cryptocurrencies.
How does Bitcoin’s scarcity compare to gold?
After the 2020 halving, Bitcoin’s annual issuance rate dropped to 2.5%, and it will reach 1.8% by 2021—matching gold’s supply growth rate. This controlled supply reinforces its value proposition.
What is driving Bitcoin’s correlation with gold?
Macroeconomic factors like central bank stimulus and currency devaluation are causing investors to treat both assets as safe havens. This trend has strengthened during the COVID-19 crisis.
Can Bitcoin replace gold?
While unlikely to fully replace gold soon, Bitcoin is increasingly considered “digital gold” due to its portability, divisibility, and predictable supply. Both may coexist as non-sovereign value stores.
How secure is Bitcoin for long-term holding?
When stored in secure private wallets, Bitcoin is highly resistant to confiscation or inflation. However, users must follow best practices for key management and storage.
What role do exchanges play in Bitcoin’s ecosystem?
Exchanges provide liquidity and ease of trading, but large withdrawals suggest users prefer self-custody for long-term holdings, reducing counterparty risk.