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Goldman Sachs and the $8 trillion NFT trading opportunity


The digital asset space has attracted a lot of attention in recent months. The number of industries showing an interest in digital assets and the metaverse has been on the rise, with no immediate signs of a slowdown. As the latest household name to dive into the crypto space, global investment bank Goldman Sachs has revealed it has started exploring NFTs and is seriously considering the “tokenization of real assets”.

What are NFTs?

Simply put, Non-Fungible Tokens (NFTs) are a unique, nonreplicable token of ownership attached to a blockchain. Their value and capital appreciation is based on their future value, which is derived both from valuation changes and future cash flow. This is principally driven by retail and institutional investor speculation. Other drivers of value include potential utility, ownership history and liquidity premium.

The recent evolution of NFTs has meant that the subject of tokenization of assets, the process of dividing the ownership of an asset into digital tokens, has become an increasingly popular one. NFTs are industry agnostic, with the concept of tokenization offering boundless opportunities. By tokenizing real-world assets, they can be purchased and owned over the internet through blockchain technology.

Ongoing developments in the NFT space within Goldman Sachs

According to a report from CoinDesk, Mathew McDemott, global head of digital assets at Goldman Sachs, told attendees of the Financial Times Crypto and Digital Assets Summit last week that the bank is “exploring NFTs in the context of financial instruments” and considering the “tokenization of real assets”. This represents a significant step forward for the Wall Street giant, as it continues to build upon its existing ventures within the NFT space.

Earlier this year, Goldman Sachs said it sees the metaverse, where real-world assets like real estate are bought and sold as NFTs, as an $8 trillion opportunity. The bank recently announced plans to launch cash-settled OTC Ethereum options trading, in addition to its Bitcoin derivative offerings. It started offering Bitcoin derivatives to investors in 2021 and conducted its first OTC crypto trade with the digital-asset financial company Galaxy Digital in March of this year.

The Wall Street giant also offered its first-ever lending facility backed by Bitcoin this week. The lending facility lent cash collateralized by the cryptocurrency owned by the borrower and is seen as a significant step for a major US bank into the space.

What other digital asset advancements have been made in recent months?

Last month, the Chancellor of the Exchequer Rishi Sunak reiterated the UK government’s intention to turn the UK into a global cryptoasset technology hub. The Treasury confirmed it is looking to recognise stablecoins, digital assets pegged to the price of real world assets, as a valid form of payment in the near future. The government has also suggested it will explore ways to make the UK’s tax system more competitive in order to encourage further development of the cryptoasset market in the UK, whilst strengthening its regulatory processes.

It is evident that activity in the digital asset space is likely to accelerate rapidly this year. Both retail and institutional investors should be aware of the potential investment opportunities which may arise within the sector.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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