Goldman Sachs May Be Looking for Crypto Venture Bargains

The bank is reportedly conducting due diligence on several companies that are “priced much more sensibly”

article-image

Benguhan/Shutterstock.com

share

Wall Street powerhouse investment bank Goldman Sachs has a strategic plan amid heavy damages caused to the crypto industry by FTX’s implosion on the back of Alameda Research’s insolvency.

A new breakdown of illiquid venture investments from the FTX-affiliated hedge fund, published by the Financial Times, shows Alameda had hundreds of millions in tokens on its balance sheet, as well as extensive equity investments.

Arthur Cheong, founder of DeFiance Capital, expects “at least 50% discount for most of the assets on [Alameda’s] book,” he said on Twitter Tuesday.

The combined investments of Three Arrows Capital and FTX/Alameda, Cheong says, cover “more than 70% of the top venture deals over [the] past 2 years,” and consequently, their sales in bankruptcy “will be the best reflection of the crypto venture market valuation post-FTX collapse.”

Goldman Sachs wants to be the buyer or investor in distressed crypto companies whose valuations have been hit by an industry-wide downturn and the fall of FTX, Reuters reported on Tuesday.

Mathew McDermott, head of digital assets at Goldman, told Reuters that the collapse of one of the most prominent crypto exchanges strengthens the case for more reliable and regulatory crypto players — and banks see an opportunity to gain from it. 

He didn’t mention which crypto firms are on the bank’s radar, but he said it’s currently conducting due diligence to evaluate the potential of various companies. According to McDermott, the targets are “priced much more sensibly.”

Bargain hunting

Waves from FTX’s bankruptcy are being felt across the crypto industry, leading to an extended series of layoffs that began earlier this year. The debacle has caused investors to rush and sell their positions, a sign of what experts believe signals a bottom.

McDermott acknowledged that the exchange’s overnight disintegration has set the market back, but the “underlying technology continues to perform.” Blockworks has reached out for comment.

Goldman Sachs has already funneled $690 million in crypto and blockchain-based companies including CertiK, Coin Metrics, Blockdaemon, Elwood and Anchorage Digital. It also plans to build its own blockchain, McDermott said. 

The investment bank set up a crypto trading desk in 2021 at a time when major institutions embraced adoption of digital assets. FTX’s rapid descent boosted Goldman’s trading volumes as investors looked for trustworthy counterparts, according to the executive.

It turns out that major companies are not put off by the industry’s woes and are, in fact, snapping up the chance to seize opportunities while investor sentiment is low. 

BlackRock CEO Larry Fink recently said he still sees the power of cryptocurrency’s underlying technology, despite the investment company losing millions from its investment in FTX.

Chao Cheng-Shorland, co-founder of blockchain software provider ShelterZoom, told Blockworks that Goldman’s move suggests it too sees enormous potential for financial profit and the expansion of its business.

“[Banks] can start a new era in both crypto and blockchain as a whole,” she said, adding, “It will no longer need to be an expensive undertaking and investors will have ample opportunity to find companies that are delivering a working product at more reasonable cost.”

Still, Cheng-Shorland said that banks owning crypto companies may undercut one of the major selling points for the space: decentralization.

Updated Jan. 24, 2023 at 5:06 am ET: Clarified quote attribution.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

BUZZ holds shares of Coinbase, Robinhood and MicroStrategy

article-image

Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume

article-image

DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit