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The cryptocurrency ecosystem responded swiftly to the public statements of experts in the traditional finance sector who hold skeptical views about cryptocurrencies and maintain closed information. It quickly expressed opposition. We believe that these experts should have a deeper understanding of cryptocurrencies. This reaction has been particularly evident in recent days, especially after Sharmin Mossavar-Rahmani, Chief Investment Officer of Goldman Sachs Asset Management and Wealth Management, made some comments in an interview with The Wall Street Journal.
I won't criticize her comments here. In fact, I intend to defend her comments. I must clarify that I disagree with most of her views, but at the same time, I believe that gaining a more comprehensive understanding of different perspectives can make us stronger supporters of cryptocurrencies. Doing so can also reduce unnecessary anxiety and be beneficial to our mental health. Moreover, it is also an interesting intellectual challenge.
Let's start the discussion from a broader perspective and with some background information.
Firstly, Mossavar-Rahmani has an impressive investment background, including 31 years of experience at Goldman Sachs, which is no easy feat, and she has earned a lot of respect because of it. Secondly, her views do not represent the entire Goldman Sachs Group. She is responsible for the asset management and wealth management departments, which are separate from sales and trading and investment banking businesses, both of which are involved in the cryptocurrency ecosystem. Thirdly, some cryptocurrency media outlets are heavily publicizing that Goldman Sachs is "under pressure" or "criticized" because of Mossavar-Rahmani's comments. I highly doubt whether Goldman Sachs cares about the anger of the cryptocurrency community, and if wealth management clients want to access cryptocurrencies, they can find opportunities elsewhere.
However, due to her significant influence in investment management, especially for those who are looking for excuses not to understand digital assets, her comments in The Wall Street Journal interview are worth discussing:
1) "We don't see it as an investment asset class."
As emphasized earlier, "we" here refers to the asset management department, not the entire Goldman Sachs Group.
It's easy for people to scoff at her limited understanding of digital assets because digital assets are obviously an "investment asset class" since they are traded on active markets, and people invest in them. However, the official definition of this term may vary. ChatGPT defines it as "a group of financial instruments with similar financial characteristics, subject to the same laws and regulations, and typically traded in the same financial markets."
Ms. Mossavar-Rahmani may want to convey that cryptocurrencies currently lack regulatory standards. Also, the idea that cryptocurrencies have "similar financial characteristics" is somewhat far-fetched. Stablecoins are very different from Bitcoin, and Bitcoin is very different from AVAX, BONK, and many other digital assets.
We should remember that she may be discussing category characteristics rather than whether cryptocurrencies are worth investing in.
2) "If you can't determine a valuation, how can you have a bullish or bearish view?"
For supporters of cryptocurrencies, a common consensus is that expecting a future price increase or decrease for an asset does not require the asset to have intrinsic value. We also know that valuing cryptocurrencies is extremely complex, and we won't go into details here due to the numerous influencing factors. But it is undeniable that the cryptocurrency market also experiences alternating bull and bear cycles. Therefore, the viewpoint that excludes cryptocurrencies from the investment asset class is obviously inappropriate.
Now, let's try to consider the issue from Mossavar-Rahmani's perspective. She is responsible for managing an investment advisory department, which faces strict scrutiny and bureaucracy. Having worked for 31 years at a highly competitive company, she does not rely on taking unexplainable risks to maintain her position. Traditional investment advisors need to explain their decision logic to clients, and they must "show their work" as a basis for investment errors. If her team cannot establish a model-based reasonable valuation for Bitcoin (BTC), they cannot provide buy or sell recommendations.
Most of us don't have the same restrictions as Goldman Sachs. For me, "price appreciation" is enough, and I have a target number in mind. When I reach this number, I may profit based on "intuition." I have also encountered other investment advisors who propose target prices, but these target prices are not based on any validated evaluation method.
What I want to express is that Goldman Sachs has many very intelligent investment analysts who are fully capable of building a reasonable valuation model. Other large companies have already done this, even though opinions are not entirely consistent, the key is the reasoning process. I believe we have reason to expect more from Goldman Sachs. The lack of an "official" model seems somewhat lazy.
However, Mossavar-Rahmani's responsibility is to ensure the safety of investments. In this context, her comments do not seem excessive.
3) "Cryptocurrencies absolutely do not create any form of value."
Indeed, this point is difficult to defend. Cryptocurrencies provide numerous services and use cases, and they have real value. Even if we only discuss Bitcoin (BTC), it is obviously of significant value to those facing currency devaluation or restricted sources of funds.
However, the term "value" can be easily misunderstood, even among professionals in the investment field. We often associate this concept with utility, potential for appreciation, satisfaction, a sense of belonging, and a range of other pleasant benefits. Art has "value," as do flowers and friendship.
But Ms. Mossavar-Rahmani may be referring to what we discussed earlier about "distributional value." Her point may be that without a recognized model to give a specific number, its value cannot be determined?
I must admit that I cannot find a reasonable explanation for this point. It seems to reflect her limited understanding of cryptocurrencies, and I can only attribute it to a lack of in-depth research, as no one would question her intelligence. Although I tried to find rationality for this viewpoint, it is difficult to stand firm.
4) "The ultimate decision is in the hands of a few."
On this issue, her viewpoint is basically reasonable. I tend to suggest adding some qualifiers when expressing it, such as using "some major decisions may ultimately be made by" or "some key decisions of certain networks may ultimately be made by." Nonetheless, I agree that the term "decentralization" is often misused.
At the same time, it is worth noting that "decentralization" is not an absolute condition. It exists in varying degrees of decentralization. In fact, many networks are striving to gradually increase their level of decentralization, as they promise to do.
5) "At least you can physically own gold and store it properly, while cryptocurrencies cannot provide such physical possession."
Goldman Sachs has long had a less positive attitude towards gold investments. Some believe that this is because the investment banking department cannot generate profits by issuing gold, while it can earn lucrative returns by helping companies issue stocks and bonds. Although I don't quite believe this claim, it is indeed rare for a large investment management company to overlook such an important asset.
Perhaps this is because gold itself does not generate any direct "value"? Gold does not have cash flows or dividends. Since it does not have specific "value," how do investment advisors form bearish or bullish views on it? Can gold really "create" value? Obviously not.
This passage reflects many people's doubts. It reveals Ms. Mossavar-Rahmani's understanding of the concept of "value," namely that value must be created. For her, value seems to require tangible output.
This also exposes her limited understanding
of how cryptocurrencies operate. In fact, many assets can produce tangible outputs. I would like to point out that this comment also indicates her limited understanding of gold investment because few institutions or high net worth gold investors actually own their gold bars.
However, stepping back, the significance of this work lies in demonstrating that not all cryptocurrency critics are wrong. It is beneficial for us to understand where the obstacles to the acceptance of cryptocurrencies lie. Acknowledging the existence of conflicting viewpoints in the market, which ultimately are not important in the long run, is also very valuable.
More importantly, think about those friends we initially refused to accept the concept of cryptocurrencies. We will be satisfied with them. They are all intelligent and well-educated financial professionals, but they eventually decided to invest time and effort to better understand what we are concerned about—they eventually changed their minds.
Maybe one day, Ms. Mossavar-Rahmani will also change her mind. Even if she doesn't, it doesn't matter. If we can expect those friends who were initially skeptical to accept our views with an open mind, then we should also strive to face those who criticize us with the same mindset. At least, doing so can help us better understand which key points to focus on when explaining and promoting our views. |
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Post time 15-4-2024 12:26:03
