What does the crypto meltdown mean for the future of digital assets? ₿

[Goldman Sachs]( [BRIEFINGS] May 19, 2022 Crypto Volatility: What’s the Outlook for Digital Assets? The meltdown in cryptocurrencies is raising alarm about the future of digital assets — or is it? Fears over soaring prices and slowing economic growth have sent investors fleeing from risk assets, notably cryptocurrencies. In the latest [Exchanges at Goldman Sachs]( Mathew McDermott, global head of digital assets at Goldman Sachs, explains the drivers, evolution and the outlook for crypto assets and the broader digital assets ecosystem. Recent volatility underscores that crypto assets are still an emerging asset class with a large number of retail participants, McDermott explains to Exchanges host Allison Nathan of Goldman Sachs Research. “The move so far has been correlated to the broader macro market moves,” notes McDermott, who points out that nearly every asset class with discounted cash flows has been hard hit by inflationary pressures. Blockchain, crypto and digital currencies are gaining broader acceptance among investors, companies and institutions. “Maturity across both the market participants and the infrastructure has given not only confidence to many different institutional sectors, but also has enabled many more traditional traders to really look forward in how they trade this marketplace because of this maturity in the product suite,” McDermott says. Venture capital investments in digital assets are surging. While valuations are pretty high, there continues to be “high levels of interest because people continue to see exponential growth opportunities and are keen to deploy that capital,” says McDermott. “I think valuations have got a little out of kilter, so perhaps we'll see some more sensible valuations in terms of investment opportunities, too.” Subscribe wherever you get your podcasts [Spotify]( | [Apple]( | [Google]( | [Stitcher]( [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Crypto%20Volatility%3A%20What%E2%80%99s%20the%20Outlook%20for%20Digital%20Assets%3F&body=https%3A%2F%2Fwww.youtube.com%2Fplaylist%3Flist%3DPLIyiGQywEp66lKvfhiDbiuZnCboYneuX2) The US Economy Is Poised to Slow as the Fed Taps the Brakes The Federal Reserve is tapping the brakes on U.S. economic growth, which could help bring down inflation and temper the most overheated job market in postwar American history, according to Goldman Sachs Research. As inflation surges, the U.S. central bank has taken a more hawkish stance this year. That’s part of the reason Goldman Sachs’ Financial Conditions Index has tightened by about 100 basis points since April, which is forecast to be enough to reduce the growth in gross domestic product by about 1 percentage point. Goldman Sachs Research now expects U.S. economic growth of 2.4% this year on an annual basis (versus 2.6% previously) and 1.6% in 2023 (versus 2.2%). The slowdown in economic growth is likely to lower job openings and eventually increase the unemployment rate a bit. Even so, economists at Goldman Sachs are optimistic that a sharp increase in unemployment can be avoided: job openings fall more, and the jobless rate less, when openings are high. (Such as right now.) The sheer momentum in the U.S. job market is forecast to push the unemployment rate down to 3.4% in the coming months, compared with 3.6% in April, according to Goldman Sachs Research. That rate is expected to increase to 3.5% by the end of this year and to 3.7% by the end of 2023. [Learn more about how the Fed’s actions are expected to help close the current jobs-workers gap of about 5.6 million.]( [Read full story]( [Read more articles]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=The%20US%20Economy%20Is%20Poised%20to%20Slow%20as%20the%20Fed%20Taps%20the%20Brakes&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fpages%2Fus-economy-poised-to-slow.html) Current Design of Stablecoins 'Can Be Risky' As financial markets swirl, a prominent stablecoin recently came unpegged from the U.S. dollar. These types of virtual assets fall into three main categories: those backed by fiat currency, those backed by cypto assets and those that use an algorithmic expansion and contraction of supply, seeking to maintain a steady price. “While stablecoins can provide a useful service within the digital asset ecosystem, current designs can be risky. More stability could be achieved through forms of government regulation and/or deeper network effects from greater non-speculative usage of the underlying protocols,” according to Goldman Sachs Research. [Read more about the volatility of stablecoins and cryptocurrencies here.]( [Read more]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=BRIEFINGS%20Brainteaser%3A%20US%20Stocks%20Plunge%20in%202022&body=https%3A%2F%2Fonegs.iad1.qualtrics.com%2Fjfe%2Fpreview%2FSV_eKE1ZVhKkYm8W6G%3FQ_CHL%3Dpreview%26Q_SurveyVersionID%3Dcurrent) Briefly…on Unleashing $6 Trillion Annually of Green Investment Recent instances of threatened energy supply have the potential to galvanize investors, corporates and policymakers to prioritize green energy sources that are also secure, reliable and accessible. But it’s going to take a lot of investment — to the tune of $6 trillion globally each year. We talked with Brian Singer, global head of GS SUSTAIN, to understand more about Green Capex, which industries will feel the effects, which technologies hold the most potential and where policy can help drive investment. To set the scene, what are we talking about when we use the term “Green Capex”? Brian Singer: Green Capex describes the capital investment needed to decarbonize the world, address water needs and shore up transportation and other critical infrastructure. We believe it will be the dominant driver of global infrastructure over the next decade, requiring $6 trillion deployed annually to meet these goals. That’s clearly a very substantial increase from the $3.2 trillion per year invested from 2016 to 2020, and the additional $2.8 trillion need represents around 2.7% of global gross domestic product, so there’s a major opportunity for Green Capex to become a critical secular theme. As investor priorities shift, which industries will come into focus? Brian Singer: One of the big points we continue to make is that there’s a broader supply chain that’s needed to ensure the success of decarbonization, develop green infrastructure and guarantee clean water. It’s not just in the technologies and the verticals of the final product — there are lots of sectors needed to support the parts and services. For example, when it comes to solar or wind energy and electric vehicles, it’s not just the panels or cars themselves but includes: • The supply chain of goods and services needed to deliver these products, such as engineering and construction building out the infrastructure • New innovations in automation that provide software and hardware opportunities • Scaling up and lowering the cost of battery storage and hydrogen • Deploying energy-efficient products more widely such as in zero-carbon buildings [Learn about “Greenablers” and the future of green investment in the full Q&A interview.]( [Read full interview]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Briefly%E2%80%A6%20on%20Unleashing%20Waves%20of%20Green%20Investment&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fpages%2Funleashing-new-waves-of-green-investment.html) The Man Attempting to Flip the Script on Degenerative Brain Diseases Above (L to R): Amit Sinha of Goldman Sachs and Ryan Watts of Denali Therapeutics Deaths from Alzheimer’s disease have increased 150% over the last 20 years. Moreover, it costs $350 billion a year to treat the disease in the U.S., with the global cost being more than $1 trillion dollars. In the [latest episode of Talks at GS]( Ryan Watts, the CEO of Denali Therapeutics, a company dedicated to defeating neurodegenerative diseases, details the challenging but hopeful road ahead in treating diseases like Alzheimer’s and Parkinson’s. Despite working on treatments for Alzheimer’s before his own mother’s diagnosis, Watts explains how his personal story underscored the urgency of developing cutting-edge therapies and technologies in this field. Some of the standout moments from the episode can be found below, [but watch the full interview for Watts’ story]( (it’s worth it). On the “unmet” need to tackle neurodegenerative diseases: “We picked one of the hardest therapeutic areas. There have been incredible advances in cancer, infectious disease and immunology, but the neurosciences, and in particular, neurodegenerative diseases, represent a huge unmet need and we felt it was time for a focused effort in this space.” On the personal experiences that fuel Denali’s mission: “Denali is not a founding story about solving my own Alzheimer’s disease. But there’s no doubt that when you know you have a risk and you see your family history, that your level of motivation is — it’s more personal.” On developing future medicines for neurodegenerative diseases: “I imagine — it may not be 10 years, maybe it’s 15 years — you’ll actually have these preventative approaches for degenerative diseases where you can remove the toxic proteins that are building up over time and really prevent the onset of dementia. And I think that’s where we’re going. Certainly, it’s where Denali is going.” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=The%20Man%20Attempting%20to%20Flip%20the%20Script%20on%20Degenerative%20Brain%20Diseases&body=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3Dnl5iUd91EQQ) Our 2021 People Strategy Report At Goldman Sachs, we know we are only as strong as our people. In our latest [People Strategy Report]( Bentley de Beyer, Goldman Sachs’ chief human resources officer, shares why our people strategy is so crucial to our success. “We are holding ourselves accountable for driving progress across a number of key priorities designed to continue to differentiate the firm as one of the best places to work as we experience one of the most competitive and highly efficient talent markets we have ever seen. Importantly, these priorities are grounded in the belief that our ongoing commitment to advancing diversity, equity and inclusion through action and impact will better meet the needs of the clients we serve,” de Beyer says. In 2021, the company received applications from nearly 1 million candidates globally for internships or permanent roles, and welcomed thousands of new colleagues to our offices and teams around the world. Some key numbers from 2021: • Employee representation from 35+ countries • Employees with 110+ different spoken languages • Almost 50% of entry-level hires were women • 21,000 employees engaging in inclusion networks • 250+ awards received across four categories: employer of choice, diversity and inclusion, sustainability, and business and innovation [Read report]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Our%202022%20People%20Report&body=https%3A%2F%2Fwww.goldmansachs.com%2Four-commitments%2Fsustainability%2F2021-people-strategy-report%2Fmultimedia%2Freport.pdf) Goldman Sachs Media Highlights CNBC - May 16 [Oil hitting $150 per barrel is a 'high probability event,' says Goldman's Jeff Currie]( (2:39) Bloomberg - May 16 [Goldman’s Lynam sees triple-B firms as 'sweet-spot']( (4:47) CNBC - May 16 [There are better opportunities outside of the U.S. equity market, says Goldman’s Peter Oppenheimer]( [Subscribe]( [Unsubscribe]( Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. To the extent this newsletter includes material from the Goldman Sachs Securities Division, please click [here]( for information relating to Securities Division material and your reliance on it. 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