Investment Banks and Traders Bet on Cryptocurrency Growth Amid Fed Policy Easing

Goldman Sachs has significantly deepened its involvement in the cryptocurrency market, becoming the largest institutional holder of BlackRock’s Bitcoin ETF. According to documents filed with the Securities and Exchange Commission (SEC), the investment bank owns 30.8 million shares of iShares Bitcoin Trust (IBIT) valued at over $1.4 billion as of March 31. This comes amid optimistic forecasts from former BitMEX CEO Arthur Hayes, who stated at the Token2049 conference in Dubai that Bitcoin could reach $150,000 by year-end, primarily due to the expected easing of monetary policy by the US Federal Reserve.

Goldman Sachs Leads the “Institutional Race” for Bitcoin

Goldman Sachs’ acquisition of BlackRock’s Bitcoin ETF shares represents a significant increase in the bank’s cryptocurrency market positions. The number of IBIT shares in Goldman’s portfolio grew by 28% compared to the previous reporting period when the bank owned 24 million shares. Surpassing other major investors such as Brevan Howard, Goldman Sachs has taken a leading position among institutional investors in the Bitcoin ETF sphere.

Besides Goldman Sachs, other financial heavyweights are also increasing their investments in IBIT. These include Jane Street, D.E. Shaw, and Symmetry Investments, indicating growing interest from hedge funds and trading companies.

“We’re observing a fundamental shift in traditional financial institutions’ attitude toward cryptocurrencies,” comments Maria Volkova, lead digital asset analyst at consulting company Digital Finance Research. “Just three years ago, such investments from banks of Goldman Sachs’ caliber seemed unthinkable. Today, they’re not only investing billions but actively competing for leadership in this segment.”

As of the end of 2024, Goldman Sachs’ total investment in crypto ETFs amounted to $2.05 billion, including about $1.3 billion in BlackRock’s Bitcoin ETF, $300 million in a similar product from Fidelity, and nearly $500 million in Ethereum ETFs, evenly distributed between BlackRock and Fidelity funds. Compared to the previous quarter, when this amount was $720 million, the bank increased its investments in cryptocurrency ETFs by an impressive 50%.

Expectations of Fed Policy Easing as a Catalyst for Bitcoin Growth

Goldman Sachs’ aggressive accumulation of cryptocurrency assets coincides with changes in the bank’s macroeconomic forecasts. Recently, Goldman revised its core PCE inflation forecast for 2024 to 3.5% from the previous 3.0%, expecting the Federal Reserve to respond by cutting interest rates three times in the second half of the year.

This “dovish” pivot could fuel further appetite for risk-on assets like cryptocurrencies and crypto-linked financial instruments.

Arthur Hayes, former head of BitMEX, holds a similar view. Speaking at the Token2049 conference in Dubai, he stated that Bitcoin could reach $150,000 by year-end, with the Fed’s policy being the main driver of this rally.

“The sentiment for a rally is ideal, just like in the third quarter of 2022. Then we saw growth in risky assets amid monetary policy easing. Now—a similar situation,” Hayes said in an interview with the Crypto Banter YouTube channel.

According to Hayes, in conditions of fear and uncertainty, US authorities will be forced to print money, making risky assets attractive again. He notes that Bitcoin has repeatedly proven its resilience to inflation, showing growth each time the Fed lowered rates and increased market liquidity.

“Hayes’ forecast of $150,000 for Bitcoin by year-end looks ambitious but not unrealistic in light of the current macroeconomic situation,” believes Dmitry Sokolov, head of the analytical department at cryptocurrency exchange CryptoEX. “The Fed’s recent decision to keep rates unchanged has already led to a 1.5% increase in Bitcoin to $96,230. If rate cuts follow during the year, as Goldman Sachs predicts, we could indeed see significant growth.”

Expanding Institutional Adoption and Future Prospects

Goldman Sachs’ increased investment in Bitcoin ETFs comes against the backdrop of BlackRock’s ongoing engagement with regulators to shape the future of digital finance. On May 9, BlackRock met with representatives of the SEC’s Crypto Task Force to discuss critical issues such as incorporating staking into cryptocurrency ETFs and advancing the tokenization of traditional securities.

These developments suggest growing synergy between traditional finance and cryptocurrency markets, potentially heralding a broader wave of institutional adoption in the near future.

“We’re observing the process of legitimizing Bitcoin as a full-fledged asset class,” explains Alexander Petrov, professor of finance at the Institute of Digital Economy. “When giants like Goldman Sachs and BlackRock not only invest in cryptocurrencies but actively work with regulators to create appropriate infrastructure, it signals a fundamental shift in the perception of digital assets.”

Hayes also notes that Bitcoin’s growth could positively affect altcoins, primarily Ethereum and Solana, which, in his opinion, will follow the market leader. However, he acknowledges that short-term forecasts don’t always pan out, and the market remains volatile.

A notable increase in capital inflow to Bitcoin occurred after the approval of spot ETFs early last year. These instruments provide retail investors the opportunity to invest in Bitcoin through traditional brokerage accounts, tracking the cryptocurrency’s price in real time, which significantly simplifies market access for traditional investors.

“The current situation is unique in that we’re seeing coordinated actions from the largest financial institutions working on both Bitcoin investments and the creation of regulatory infrastructure,” concludes Volkova. “This creates a solid foundation for long-term growth, even if we observe volatility in the short term.”

At the time of writing, Bitcoin is trading around $96,230, showing moderate growth following the Fed’s latest decision to maintain interest rates at the current level. The market’s further dynamics will largely depend on macroeconomic factors and central bank actions, as well as the ongoing process of cryptocurrency market institutionalization.